Delaying Foreclosure by filing Chapter 13 - How Long can this go on??

Started by JimC24 • 8 replies • 321 views

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JimC24 (Connecticut)
Posts: 60

Posted:

Hi Everyone,

I am the condo President of a small condo. One of the unit owners hasn't paid condo dues for more than 5 years. His mortgage is underwater and he not paying that either. We are allowing the lender to pursue the foreclosure because it is more cost effective. Every time we get to the point of foreclosure - the unit owner files for Chapter 13. So far he's done this twice to get an automatic stay and each time the bankruptcy was dismissed a few months later - I think because the unit owner has not intention of filing a payment plan. My question is how long can this go on and is there anything I can do to stop it. I can't seem to get a straight answer from our lawyer on this. So far all the results I get from internet searches suggest that the there is no limit to how long the unit owner can refile for chapter 13 to stay off the bankruptcy. It usually takes the bank about 6 months after the chapter 13 dismissal to restart the process and another 6 months to get to the point where the foreclosure will go forward. It is at this point when the unit owner declares chapter 13 to get a stay. Any suggestions? This one unit is a significant percent of the condo annual revenue.

SheliaH (Indiana)
Posts: 6,964

Posted:

This is one of the many reasons I stepped down from my board. I served 10(!) years and we had an owner who did the same thing. Worse yet, the mortgage company wasn't helpful at all because this was in the middle of the real estate meltdown from 2008. Tge mortgage company knows they'll at least get some of their money back and so it doesn't matter to them how long thus gets dragged out.

Our former attorney used to say this homeowner knew how to play the game, which really annoyed me until he hired an associate who got as ticked off as I did and was finally making some progress at the time I left. Later the president told me the judge finally had enough, told the mortgage company to end this once and for all, otherwise the board would be able to complete the foreclosure. I don't have access to those records anymore,, but I think they rolled the assessments into the monthly payments.

That being said, you can lose the automatic stay protection in multiple filings, but I think that's up to the judge. If you can, attend the next court hearing with your association attorney and see if you could make a statement saying how this deadbeat has impacted your budget. I went to court with ours and was planning to do just that when the judge announced the filing was being terminated(again). The owners attorney told the court he was withdrawing (guess he wasn't getting paid either).

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

SheliaH (Indiana)
Posts: 6,964

Posted:

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JimC24 (Connecticut)
Posts: 60

Posted:

Thanks SheliaH.

I was thinking of attending the next hearing and making a point how the deferral of the foreclose is affecting our budget - but your comments actually made me think it may help. The other unit holders are paying nearly $50 / month to cover this unitholder - and this can add up over time. I think it is pretty outrageous that the court system allows this to go on - but I guess it is a source of revenue for lawyers so no one is in a big hurry to do anything about it.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may want to talk to your lawyer about this. Filing a chapter 13 and 14 are different. They also don't mean the foreclosure has to stop. A HOA is different than many creditors. It's not a credit card company nor a bank. Bankruptsy filing types can mean not paying credit cards but still subject to all other debts as an example.

Either way, a foreclosure takes a long time. If you have the right to redemption time, then it can be up to a year. Meaning the person can pay back all they owe in the right to redemption period to get the property back. That is why anyone buying the place may not be able to do anything to the property for up to a year. Just maybe pay the dues...

Former HOA President

ElleN (Idaho)
Posts: 4,420

Posted:

Jim, see Max's posts, talking about contacting an owner's loan's servicer in this thread:

https://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/342172/view/topic/Default.aspx

JimC24 (Connecticut)
Posts: 60

Posted:

Thanks MelissaP1 - At this point I just want to cut our losses and replace the existing owner with an owner that will pay condo dues. There is a significant overdue balance but based on state law - the condo only has a super lien that covers 6 months. A super lien just means we have the same priority to be paid from the under water value of the home given their is no equity - for those who are not familiar with this term. Maybe that is the problem - if they changed the law so the association would have a super lien on par with the lender once the foreclosure proceeding starts for all accumulated dues, then maybe the lender would have more incentive to act. The problem is there is no visibility into this process and how long it could go on. If we knew that it would cost say $2000 to pursue the foreclosure ourselves and we could clearly see an end to this nightmare then it would make sense to do it. But if we spend $2000 and the owner keeps delaying the process indefinitely anyway then it's not worth it.

Thanks ElleN - I'll take a look at the post.

SheliaH (Indiana)
Posts: 6,964

Posted:

That's exactly what you should tell the judge if you get the opportunity. Sometimes I think judges may be a little indifferent to all this because there have been stories of HOAs filing foreclosures on small debts. They don't seem to understand that the only way HOAS work is for everyone to pull their weight.

It would have been one thing if this homeowner had been candid about his/her financial situation but that didn't happen and apparently the mortgage company is in the same boat. However, it has hundreds of millions of dollars in assets, whereas the association does not.

Clearly this homeowner can't or refuses to cooperate so it's best he/she moves on and the house sold to someone who will pay. Even then, the board will likely have to write off a huge part if the debt, possibly all of it because there may not be enough money from the selling price to satisfy the loan and tbe association.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

LetA (Nevada)
Posts: 2,679

Posted:

I feel your pain, we have a homeowner playing the same cat and mouse game with us. They have not paid
dues regularly in four years, they are three years behind with just as much fines and legal fees as the entire
assessment debt. A public records search shows public utilities filing a lien and a lien removal every four
to five months like clockwork. We still have an active lien that has not been satisfied; every time we are prepared
to foreclose, they pay something around 5-8% just putting the proceedings to a grinding halt.

I like the idea of the board president showing up at the BK hearing, bring your corporate council with you.
Speak to the judge, perhaps having a person representing the HOA to see who this affects will make the judge
see the whole picture.

Unfortunately nothing will be done to protects HOA when laws suborn deadbeats

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