Our Clients Ask Us: Suspension Of Rights During Bankruptcy

One of our owners recently r rjoejorjfiled for bankruptcy. We had aaaaaaaapreviously suspended that particular owner’s right to use the pool and recreational facilities. Should we continue to suspend these rights despite the bankruptcy filing?

ANSWER: NO. Reinstate the rights.

For the purposes of bankruptcy, look at is as an owner getting a clean slate, as least at the initial filing of the bankruptcy. If the owner becomes delinquent on maintenance fees subsequent to the bankruptcy filing, this may be a different story. But once a person files for bankruptcy, an automatic stay is imposed, which means that any creditors are prevented from attempting collection or taking away rights due to the delinquency. The stay is not removed until either 1) the debtor is granted a discharge; 2) the Court dismisses the case or 3) the Association obtains a Relief from Automatic Stay through the bankruptcy court. It is important to keep in mind that there are stiff penal ties for violating a bankruptcy stay. If the Court finds that the Association has violated a bankruptcy stay, the Association may be required to pay actual damages, which might include the debtors’ attorneys fees or any other monetary harm incurred by the debtor. In egregious cases, the Court may impose punitive damages against the Association, which may include damages of up to $25,000 per occurrence. If there is a question on how you should handle a bankruptcy, please call our office—the call is free.

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