Why Should an HOA Hire a Bankruptcy Lawyer?

Check out this scenario and see if you know what to do (if you even understand it):

A member of an HOA hasn’t paid assessments for a long time. The association records a lien and files a lawsuit to enforce the lien by foreclosure. The association gets a judgment, and wants to force an auction sale to get the money.

But what just happened to the lien?

One court in California has ruled that the lien disappears when the judgment is entered and unless the association records an abstract of the judgment it can’t finish the foreclosure with a sale!

It’s only one case - a very badly decided one - but it’s there. And if you just go ahead and record an abstract everything will be okay, right?

But then the delinquent homeowner files bankruptcy. Now you’re in a different world!

Under bankruptcy law the delinquent homeowner can avoid an abstract. He or she can’t however avoid a lien.

But what happened to the lien? According to one court, it’s gone, and by the same logic, once the abstract gets avoided, you lose the right to sell the delinquent owner’s property to recover the unpaid assessments which, by now, have probably become a very big number!

Confused? Well you’re in good company. Ninety percent (90%) of the lawyers in California - who don’t actively practice bankruptcy law are probably right there with you!

This is only one of a dozen or more things that can happen when a delinquent owner files bankruptcy. And it’s a shame, because when an association hires a lawyer who is skilled in bankruptcy law, the association can survive the bankruptcy and collect its money more than seventy-five percent (75%) of the time!

How do I know this? As a bankruptcy lawyer for over thirty years I’ve handled over 10,000 bankruptcy and collected millions of dollars for my clients that many associations just wrote off and walked away from.

No intelligent Board would hire an unlicensed contractor. But having even the most skilled collection lawyer who doesn’t specialize in bankruptcy is roughly equal to doing the same.

Just so you are not left in the lurch, there is an answer to the problem set forth above. But it’s only found in the bankruptcy law.

Wouldn’t you rather have someone who knows that - and all the other twists and turns of bankruptcy law - than someone who doesn’t?

James Judge (james@thejudgefirm.com)