The Communicator - Volume 1, Issue 2 - (Page 15)

Dealing with By M. Jeffrey Micklas EACH TIME IT happens, you get that sense of despair and confusion. No, I’m not talking about another new “Rocky” movie. Rather, I am referring to the anxiety that comes when a manager or board member receives the notice that a homeowner has filed for bankruptcy. However, by following a few simple steps specified in this article, you can ease that initial sense of despair and confusion. (The “Rocky” movie you will have to handle on your own.) If you have not yet done so, you should develop a relationship with an attorney experienced in bankruptcy matters, as the number of bankruptcy filings is expected to increase substantially. There is a special skill set needed for bankruptcy matters, a skill set that is different from that which your construction-defect or governing-documents attorney or general counsel will necessarily have. Since the agency you use for collection needs to work closely with your bankruptcy attorney, it is extremely helpful if there is a relationship that allows for the fast and seamless transition of documents and information between them. Upon receiving a bankruptcy notice, the first thing you must do is immediately cease any attempt to collect or recover a claim against the debtor. Instantly upon the filing of a bankruptcy petition, the debtor is protected by what is referred to as an “automatic stay,” which precludes any attempt to recover a claim. Thus, you must immediately notify your collection agency, your attorney, or anyone else who may be seeking to collect from your debtor/ owner on your behalf, of the fi ling. The next step is to separate your claim into pre-petition and post-petition debts. Pre-petition debts are those that were incurred prior to the filing of the bankruptcy petition, while post-petition debts are those that become due and payable after the filing of the bankruptcy. Generally, post-petition payments must first be used for post-petition debts. If, Bankruptcy for example, the debtor filed his bankruptcy petition on Feb. 20 but was in arrears with respect to association dues of $300 per month and the debtor made a payment of $300 on March 2, this payment would first be applied to post-petition payments that were due – that is, the March 1 assessment of $300. This $300 payment should not be applied to the pre-petition arrearage. Generally, when reference is made as to whether the debtor in bankruptcy is “current,” it is the post-petition payments that are being considered. Additionally, when separating your claim, you should also be cognizant of whether your claim is secured or unsecured, a secured claim being one in which the Notice of Delinquent Assessment is recorded prior to the bankruptcy petition fi ling. You should then determine what bankruptcy chapter is involved. Generally, the two chapters with which you will be involved are Chapter 7 and Chapter 13. Simple Steps to Safeguard the Interests of Your Association © istockphoto.com/Michael Martin The Communicator • 15

Table of Contents Feed for the Digital Edition of The Communicator - Volume 1, Issue 2

The Communicator - Volume 1, Issue 2 Contents President's Message The Hammer is Broken Top 10 Mistakes That Get Board Members Sued Dealing with Bankruptcy Ask the Experts – Are Your Contractors Licensed and Insured? 2008 Events & Education Calendar Welcome to CAI BayCen Directory Updates Index to Advertisers

The Communicator - Volume 1, Issue 2

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