Effective for all bankruptcies filed April 20, 2005 and after, the Bankruptcy Abuse and Consumer Protection Act of 2005 will apply. For those owning property within a condominium or homeowners association, the Act expands the definition of the assessments a debtor may not discharge in bankruptcy. Previously, the Bankruptcy Code required a debtor to remain in residence within a condo or homeowner association lot in order for the association to claim a collection right to assessments. Under the recent amendment, the debtor must retain an ownership right in the lot or association to be liable for assessments.
For most associations, this amendment simply means a clearer picture of what assessments a debtor will be liable for in the event of bankruptcy. Of course, an association board should remain cognizant of the automatic stay as to collection proceedings once a debtor files for bankruptcy relief.
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