The issue at stake is whether an owner of real property within a community association, who files a bankruptcy petition under Chapter 13 of the Bankruptcy Code, may discharge all past and future assessments that accrue during ownership. When an owner files a Chapter 7 bankruptcy petition there is a specific statute that precludes from discharge all post-petition assessments. 11 U.S.C. § 523(a)(16). The Bankruptcy Code, however, is silent as to whether post-petition assessments are discharged under other bankruptcy chapters.
There is a split of authority throughout the United States as to whether owners who file a Chapter 13 bankruptcy are liable for ongoing assessments. The Ninth Circuit is arguably the most influential since it is the largest in terms of geography and population. As such, the outcome of this case threatens the livelihood of community associations throughout the country from being able to collect assessments once they file a Chapter 13 bankruptcy.
On July 10th, 2018, the Ninth Circuit held against community associations, creating a heightened duty of record keeping that few boards or management companies can maintain. Specifically, if an owner is relieved of all personal liability to pay assessments after filing a Chapter 13 bankruptcy, the association must keep a record of that bankruptcy and never attempt to collect a future debt for unpaid assessments from the owner personally – even if the owner was not delinquent at the time he/she filed bankruptcy and even if the bankruptcy was filed decades ago.
Prior to the Ninth Circuit's ruling, the lower bankruptcy court and district courts who heard the case had both agreed with my client's position, which was the de facto approach.
Amicus Brief /Petition for Writ of Certiorari
Status: Petition for Writ of Certiorari Denied
Prior ruling: Ninth Circuit Opinion
Brief Author: Thomas Moriarty, Esq.
Brief Contributors: Mr. Chad Miesen, Esq., Mr. Craig Zaller, Esq., Mr. Tim Carey, Esq., Mr. Richard Ekimoto, Esq., Mr. Brian Fellner, Esq., Ms. Kimberly Bielan, Esq.
CAI Amicus Review Panel: Robert Diamond, Esq., Edmund Allcock, Esq., Gary Kessler, Esq., Michael Karpoff, Esq., Henry Goodman, Esq.