the Court held that post-petition assessments arise from the pre-petition debt and therefore the debtor’s personal obligation to pay the assessments is eliminated when the debtor is granted discharge.
Te association does retain its in rem rights to foreclose on the property in the event that the post-petition assessments are not paid. But, if the lender has already foreclosed on the property due to the debtor’s delinquency, the association loses the opportunity to collect the delinquent post-petition assessments prior to the lender’s foreclosure from the debtor if the debtor is granted discharge in his/ her/its bankruptcy case.
The take away from this case is that it is imperative for an association to
record a Notice of Delinquent Assess- ment lien against the real property when the assessments become delin- quent and before the owner(s) of said property file for bankruptcy in order to preserve the association’s rights to collect and foreclose against the prop- erty. Moreover, it is imperative that the association or its attorney review the debtor’s bankruptcy documents including the Statement of Intentions and/or the Plan to see whether the debtor is surrendering the real proper- ty so that the Association can take the necessary steps to protect its in rem rights against the property and obtain payment of the post-petition assess- ments. For example, if the debtor surrenders the property in the Plan and the post-petition assessments are delinquent, then the Association should proceed with the Motion for
Relief from the Automatic Stay so that it can proceed with the foreclo- sure of the property. Otherwise, the Association may be unable to col- lect both the delinquent pre-petition and post-petition amounts from the debtor, as well as the property if the lender forecloses.
SANDRA L. GOTTLIEB, ESQ. is the managing partner and head of the transactional division of SwedelsonGottlieb, a law firm
that exclusively represents community associa- tions throughout California.
ALYSASA B. KLAUSNER, ESQ. is an associate attorney at SwedelsonGottlieb, which represents community associations throughout California.
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