Homeowner Dues When Home is Foreclosed

A recent article describes a big problem homeowners with homeowners association dues following bankruptcy.  The big problem is found when such homeowners surrender their homes, but still remain owners of the property because the bank will not take the property back.  A partial excerpt of the text is found below:

A federal bankruptcy judge in Nashville has ordered the sale of a flood victim's home after the lender refused to foreclose, in what legal observers say is a first-of-its-kind ruling.


Sheryl Pigg lost nearly everything in the 2010 flood, according to The Tennessean. She ultimately found a new home, declared bankruptcy and discharged her debts.


But a 2005 change to federal bankruptcy code made Pigg liable for continuing homeowners association fees at her abandoned home, because she was still the legal owner. Pigg sued mortgage holder Bank of America to get the lender to foreclose, accept a deed in lieu of foreclosure or allow a sale of the Nashville condominium.


In his ruling, Judge George Paine II ordered Pigg's bankruptcy reopened so that a trustee can sell the home, with the proceeds going first to the homeowner's association and then the bank. He reasoned that Bank of America has consented to the sale of the flood-damaged condominium through its inaction.


"With the real estate collapse, lenders, who otherwise have the right to do so, are choosing not to foreclose on their collateral leaving homeowners in limbo," Paine wrote. "Congress' broadening of (the bankruptcy code) to protect HOAs deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code."


In court filings, Bank of America argued that it was not obligated to foreclose on an abandoned property.


"Bank of America is reviewing Judge Paine's decision," the bank said in an emailed statement to The Tennessean. "At this time, we have not decided whether to appeal."

For questions on homeowners association dues in bankruptcy, call the San Jose Bankruptcy Attorney  Henshaw Law Office at (408) 533-1075.

www.Bankruptcy-SanJose.com

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Improving Economy?

Bankruptcy courts may be one of the better economic indicators of both the local and national economy.  A recent article dated July 4, 2011, of an interview with a bankruptcy judge in Florida gives some insight on why this is so.  Judge Glenn of the Middle District of Florida said, "Filings slowed dramatically after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, but have since risen annually."

Judge Glenn also described one reason why individuals file for bankruptcy protection.  He said:

When you talk to the lawyers at the Bar meetings, you hear how the foreclosures in the state courts have slowed a little because of all the foreclosure problems. There is speculation that when the foreclosures pick back up in the state courts, that the bankruptcy filings will pick up.

That’s because 30 percent of our filings in Jacksonville are the kind of filings to save homes, Chapter 7 is liquidation, Chapter 13 is to save a home, Chapter 11 is business reorganization. About 25 to 30 percent of our filings, districtwide and in Jacksonville, are Chapter 13s, so when foreclosures pick up, this will probably pick up.

Judge Glenn also predicted that bankruptcies should flatten out, but could increase as the population in his District increases.  He also said that, "From all I can tell, [the economy] is getting better. I base that on the fact that the job markets, although they’re increasing slowly, are increasing.  From what I see, for the last 12 months, our filings are only up 1 percent as opposed to how much they increased before that. For the first five months of this year, they are down. I think the economy is getting better. Slowly."

Let's compare the Middle District with the Northern District of California.  From March 2010 to March 2011, 38,405 cases were filed in the Northern District.  This compares to 35,401 during the previous year.  This is over an 8% increase from 2010 to 2011.  Similarly, in the San Jose Division, the total number of bankruptcies filed increase over 5% (13,117 in 2011 compared to 12,476 to 2010).


The hope is that we will all recover in the near future.  


For more questions on consumer or small business bankruptcy protection, call the Henshaw Law Office at (408) 533-1075.  


www.HenshawLaw.com
www.Bankruptcy-SanJose.com


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