Protect Association’s Interests from Bankrupt Member
With almost 800,000 bankruptcy filings in 2016 alone, chances are that someone living in your community will declare bankruptcy at some point. So, what does that mean for you and your association? When a person files for a bankruptcy, the court immediately issues an “automatic stay.” This is a big protection of bankruptcy because the automatic stay prohibits any creditor or individual from attempting to collect on a debt or take any action to collect that debt as of the date of the bankruptcy. If one of your members is in arrears with the association, you must follow specific guidelines as soon as the bankruptcy is announced since the automatic stay is in effect as of the date of the bankruptcy filing—and stays in place until the court sets it aside or until the proceedings end.
When a court notifies you that you’ve been named as a creditor in a bankruptcy, your first and immediate step should be to notify your attorney. It’s essential to have someone who’s familiar with bankruptcy law review the bankruptcy notice you receive. Bankruptcy is a complex area that’s ruled not only at the federal level, but varies by state and district. Adding to that, no two bankruptcy cases are the same; many issues arise on a case-by-case basis. An attorney will review the case and understand significant details in the filing that will help guide the best course of action. The notice that you receive will provide you and your attorney basic information on the bankruptcy proceeding, including the case number, filing date, date of the first meeting of creditors, and a general statement of the debtor’s assets and liabilities.
For a detailed list of the next steps to take, including filing a claim, see “Take Proper Steps When a Member Declares Bankruptcy,” available to subscribers here.