Bankruptcy Reform Bill Passes U.S. Senate

On Monday, February 28, 2005, I reported that a new Bankruptcy Bill was introduced in the U.S. Senate. Yesterday, the U.S. Senate passed the bill. It contained the language that would clarify that community associations, including homeowner associations and commercial condominiums are entitled to post-petition assessments as long as the debtor owns 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. . . .

The bill is currently scheduled to be marked up by the Judiciary Committee in the U.S. House of Representatives on March 16, 2005.