New Bankruptcy Bill Introduced in Senate

Jonathan Alper, Esq. reported in his Florida Asset Protection Blog that a new bankrputcy bill was introduced in the U.S. Senate. He states, "Senator Grassley (R-Iowa) introduced a bill which makes it more difficult for debtors to file Chapter 7 bankruptcy. The bill aims to cut down on abusive and frivolous bankruptcy filing. Its principal change is a "means test" for people wanting to file Chapter 7 bankruptcy. People who earn less than the median income in their state are exempt from means testing. Click here to read more.

The bill also contains language that I assisted in drafting while Chair of Community Associations Institute's Government and Public Affairs Council. CAI has been trying to add this language to the bankruptcy code for several years. The language would clarify that community associations, including homeowner associations and commercial condominiums are entitled to post-petition assessments as long as they own the property. Specifically, it would expand the bankruptcy exemption contained in 11 U.S.C. 523(a)(16) to read as follows:

for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or posessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case. . . .

This change is important because community associations debtors should pay their fair share of the common expenses of the community they belong to at least for assessments incurred after they filed for bankruptcy. If debtors do not pay their fair share, it means that all of the other owners in the community must make up the difference.