Community Associations & Serial Bankruptcy Filers

Recently, the Tampa Bay Times featured an article regarding homeowners who have abused bankruptcy laws in order to strategically delay foreclosure actions. This is an issue that has affected banks who have initiated foreclosures and it has also severely impacted Community  Associations who are either intertwined in the bank’s foreclosure case or have filed their own foreclosure. Especially during the recent recession where many homeowners faced foreclosure, some resorted to desperate measures, including this type of abuse of the bankruptcy process. The tactic is typically utilized when the case is nearly complete and the property is scheduled for foreclosure sale. The homeowner will then file a bankruptcy petition to stop the sale from proceeding, as the bankruptcy law provides for an “automatic stay” to be imposed whenever a person files bankruptcy. The stay effectively forces all creditors to cease all collection activity. Community Associations who have lawsuits pending with foreclosure sales scheduled are also required to halt the process. In the most egregious cases, homeowners have successfully filed over a dozen bankruptcy petitions as husband and wife, taking turns filing in one name then the other to prevent cases from concluding. The homeowners continue this pattern for several years while residing in the property without paying their mortgage payments or their Community Association assessments. For Associations this becomes frustrating and burdensome for the entire community.

Recently, the Judges in the Middle District of Tampa have become more aware that this tactic has been used by individuals deliberately and in an abusive manner. In order to prevent future bankruptcy petitions from being filed, the Judges conduct hearings requiring the homeowners to present themselves before the court and explain their circumstances. If the Court finds that the homeowner is a serial abusive filer, a ban from filing another bankruptcy petition will be issued for two years. Community Associations should consult with their attorneys to take the initiative and review bankruptcy cases affecting their communities to analyze their potential legal options. Unless action is taken promptly in these types of situations, the unpaid assessments can easily snowball into large amounts and cause stress on the community. In cases with multiple suspicious bankruptcy filings, the Association’s attorney should seek relief from the automatic stay in the bankruptcy court to be able to resume work on behalf of the Association and to avoid further delay.


David Befeler, Esq.

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