Anyone had luck collecting from individual after foreclosure?

Started by LynetteB • 10 replies • 3163 views

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LynetteB (Texas)
Posts: 141

Posted:

I searched the topic of small claims court to collect dues after foreclosure, but I didn't see anyone state any results.

Has anyone sued an individual in small claims court for unpaid dues after they had been foreclosed by the bank? If so, what was the outcome?

I assume that most individuals who go through a foreclosure cannot pay even if they have a judgement against them. Do you spend $65 to try to collect, or do nothing? We have 3 accounts that owe between $1100 - $1600 that we are trying to decide on. File or write it off? Or any other options?

Before any of you say it, we don't plan to let account balances get this high before action is taken in the future. These accounts were high before this board adopted the current procedures. (could have been and should have been sooner, but that is another topic).

RichardP13 (California)
Posts: 1,767

Posted:

My brother-in-law just purchased a bank owned home 3 months ago and he had to pay the lien the HOA put on the property to clear title.

MicheleD (Kentucky)
Posts: 4,491

Posted:

I would check with your state law regarding the affect liens have on foreclosures.

In Kentucky, a foreclosure extinguishes any HOA lien, so our documents are written to reflect that.

Our attorney has advised us on a several case-by-case incidents where we may want to pursue the debt in small claims. So far we haven't done it.

But what you need to look at is (again) first whether you can do that in your state (we can, the lien just doesn't survive the foreclosure), then what the value of the home is versus what is left to pay (what the bank is trying to recover).

MicheleD (Kentucky)
Posts: 4,491

Posted:

Oh, I forgot to mention, there were at least 3 cases over the years where the house went into foreclosure and we did not automatically release the lien. We figured that we would just be SOL, so didn't want to waste the money unless we had to and since a foreclosure extinguishes the lien, we figured the bank would just ignore it anyway.

Oddly enough, we received calls at the closings when the banks were selling the homes to someone else asking for the lien payoff amounts.

We ended up getting our money anyway. But I'm pretty sure that's a fluke.

We've probably have just as many we've written off.

PaddyF (California)
Posts: 9

Posted:

We're in California, so the laws here may well be different to yours, but our HOA turns over such situations to an agency that specialises in collecting such debts. It costs us nothing to do that (if money is recovered, the agency gets half, we get half, otherwise no charge). Statistically, the odds of collecting anything in that circumstance are pretty slim, but if someone else is willing to attempt it for you at no up-front cost, it seems like it's worth a try.

JeanS1 (California)
Posts: 23

Posted:

Paddy,

We're in California also. What is the name of the firm that you hired to collect debts.

JeanS1

SkuddleM (Colorado)
Posts: 62

Posted:

My HOA has two lot owners who have refused to pay assessments for several years. The amounts owing are about $2000. I'm in Colorado where I believe the limit on relief of unpaid assessments is 5 years.

The BOD is obligated to do something about it lest it set a precedent for ignoring its governing documents, practicing selective enforcement (I love that one), showing partiality and/or preferential treatment, etc. Our BOD has decided to ask its attorney to file lien foreclosure suits in District Court.

Maybe this will work, maybe it wont. But at least nobody can say that the BOD is not doing its job with respect to delinquent accounts.

In my experience, Small Claims Court settlements only work when the parties want them to, and the loser usually doesn't. If, for example, I win an SC judgement and the loser refuses to pay, it becomes my job to collect. My options are to file a suit in District Court, which will tie up several hundred of my dollars just to get to an initial court date, much more should the defendant decide to fight me. Or, I can pass the situation on to a collection agency (which BTW hasn't worked in the past for one of the delinquent lot owners). Or I can write it off.

There is a lot more to this situation, but I thought I'd just drop my comments into the hat. YMMV

MicheleD (Kentucky)
Posts: 4,491

Posted:

Or you could garnish his/her wages. . . .

DanielH1 (California)
Posts: 482

Posted:

I'm in California and we use A.S.A.P. Collections Services ( http://www.asapcollect.com/ ).

They specialize in HOAs.

The homeowner gets the collection fees added onto his debt directly; the collector generally doesn't bill us.

However, when pursuing small claims, the HOA may have to front the money for a <$1,000 debt. If it is above that amount, I think that they'll usually pursue them without an upfront fee. (Of course, if you win, you would generally get your fee back.)

LarryK1 (Washington)
Posts: 32

Posted:

To answer the original question, it really depends and should be decided on a case-by-case basis.

A couple of things to consider:

What is the former owner's financial situation? Was the property owner-occupied? or was it an investor-owner property that was rented out? If the latter, the former owner may have assets and just wanted out since he was upside-down on the property.

Has the owner declared bankruptcy?

Do you have bank account/employment information/current address for this former owner? You will need this for post-judgment collection and/or serve the owner.

What is the makeup of the delinquent assessments your association is trying to collect? Is it just the periodic assessments? or late fees, "security deposit", attorney fees as well? Generally, small claims will likely be more successful if it is just periodic assessments.

Is someone on the board/management company willing to go to small claims court?

Do you have the ability to go to small claims court? In addition, to the assessments section of the declaration and state law, be sure to review the powers of the association and/or restrictions on legal proceedings in the governing documents. Many recent declarations require relatively large vote requirements to pursue anyone other than current owners.

What is the statute of limitations/automatic extinguishment of liability for the delinquent assessments under state law? If the deadline is close for some of the assessments, then you might want to sue in small claims court since the judgment will generally remain for more years.

Is the former owner likely to show up and defend in small claim court? How legally savvy is the former owner? The less likely he is to show up the more likely you are to get judgment.

As for using a collections company instead, I would suggest against it unless you are assigning the debt to the collections agency and getting money for it. A legally savvy person will just send a cease and desist letter under the Fair Debt Collection Practices Act and/or state law. Then, you are right back to considering whether you want to sue or not.

KimK3 (Washington)
Posts: 1

Posted:

Wow Larry: I like the way you walked us through the critical thinking process in your reply. Are you an attorney? I have a question about whether in WA state, non-condo HOA liens survive foreclosure initiated by the first lender, and I have given the CCRs the title info to 3 lawyers and they can't give me a straight answer. If you are a lawyer, I want to contact you, and if you are not, do you know one that can answer my question? Thanks and regards, Kim

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