Debt on Stripped Association Liens May Survive When Condo Sold

Though Fort Lauderdale chapter 13 cases routinely enable a debtor to strip the association lien for the amounts due prior to the filing of the bankruptcy, a recent case limits the benefit of eliminating the lien. 

This lien stripping of association liens seems to be well settled law amongst the bankruptcy judges in Florida.  Thus a debtor who is way behind to his association, and might be on the eve of foreclosure with the association, can file chapter 13 and eliminate that lien if the property is worth less then the balance of the first mortgage.  (Note that if the association cannot be stripped, the debtor can still pay the arrears plus the current fees over 5 years.)

The debtor would continue to owe monthly payments on the current association fees as long as the debtor remains on title.

Associations have tried to find a legal argument against this lien strip in bankruptcy, but have been unsuccessful.  However, a decision on October 29 by Judge Isicoff in the Miami bankruptcy division of the Southern District of Florida has provided a great measure of relief to associations.  Debtors attorneys must be able to advise their clients of the consequences of this decision. In re Sain, 2013 Bankr Lexis 4564, Case no. 13-13325, recognized the unique circumstances of condominium assessments.  Though the debtor can strip the lien and discharge the debt, the personal obligation survives as to the subsequent purchaser of the property as a result of the provisions in the Florida condominium statute.  Thus the debtor who strips his association lien may find that she cannot sell her property without the association being paid for the amount that had been stripped and discharged as to the debtor.  Also see Judge Isicoff’s decision also on October 29 as to other condo strip issues, In re Fernandez, 2013 Bankr Lexis 4693, Case no 13-14374.

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