Mark and Ronda Rones, Debtors. Case No. 14-35899 | Whispering Woods Association (New Jersey)
The debtors are owners of a unit located within the association. The owners failed to pay their assessments and a Notice of Lien was filed by the association in the amount of $18,761.76. After three prior failed attempts to confirm a Chapter 13 plan, the debtors filed this Chapter 13 bankruptcy on December 30, 2014, proposing payment in full of $1,494 of that lien with the balance treated as unsecured debt in the plan. The $1,494 represents the statutory six-month priority over the mortgage as codified under state law.
The debtors argue that the unsecured portion is subject to modification while the association argues that the entire lien is secured and thus ineligible for modification pursuant to the anti-modification provisions of the Bankruptcy Code. The Association is consistent with precedent – that so long as there is security in the primary residence of the debtors, the entire lien is protected from modification. The court correctly held that the condominium lien was a security interest, created by the recording of the master deed and made effective upon the acceptance of a unit deed. However, the court incorrectly analyzed the lien in determining that the lien was still not protected by the anti-modification clause, which has the effect of categorizing the lien as both a security interest and a statutory lien, something that Congress has prohibited.
The issue is one of both local and national consequence as the decision is the first in the nation to determine that condominium assessment liens are eligible to be stripped off as wholly unsecured liens despite being classified as security interests in Chapter 13 cases.
Brief
Prior Ruling: Lower Court Decision
Status: District Court Opinion
CAI Amicus Brief Author: Steven G. Mlenak, Esquire
CAI Amicus Brief Review Committee: Robert Diamond, Esq; Tom Moriarty, Esq; Karyn Kennedy Branco, Esq; Jennifer Loheac, Esq; Jim Strichartz, Esq.