As we continue embracing our lives and living “la vida covid,” we have few economic certainties. Here’s what we do know: collection of assessments in Colorado has slowed but has not stopped, lender foreclosures in Colorado are being significantly delayed, and many of our friends and neighbors are struggling with reduced income or in some cases, no income at all. That loss of income will result in an uptick of owners who become delinquent on their association obligations as well, whether it’s being unable to pay assessments to being unable to afford property maintenance obligations pursuant to association covenants.
As we’ve seen in past economic downturns, personal bankruptcy filings
increase as unemployment increases. And at this point, our unemployment rate has definitely increased. In fact, Colorado is currently reporting that more people filed for unemployment benefits in the last week than in all of 2019 combined. Wow. Let that sink in. Thus far, we’ve seen over 2,300 bankruptcy filings this year, with bankruptcy filings increasing March, 2020 over the number of February, 2020 filings. Folks, we’re nearly certain we will see more. In fact, all of the bankruptcy attorneys I’ve spoken with have said the bankruptcy bar is preparing for a slew of new cases.
Here’s what that means to all of us:
- Expect to receive bankruptcy notices and act quickly to turn those over to your legal counsel as soon as possible so that the bankruptcy deadlines are not missed, since this impacts the association’s ability to collect.
- Advise your associations to anticipate delays due to the stay on collection activity that is in effect as soon as an owner files bankruptcy.
- Remind your board that there is no limit to the number of times an owner can file bankruptcy, although there are limitations on when an owner can receive a discharge of debts and whether an owner is filing bankruptcy in bad faith.
- Remember the differences between Chapter 7 and Chapter 13 bankruptcies, specifically the differences in payment to the association of the past due balance. Contact your legal counsel if you need a refresher on these!
- Know that bankruptcy doesn’t necessarily mean the association won’t be paid. There are a number of factors that will influence the outcome of a bankruptcy proceeding, including the type of bankruptcy an owner files, whether there are assets to be administered, whether the debtor attempts to avoid the association’s lien, and whether the association has filed the proper paperwork prior to the bankruptcy code deadlines. Again, act quickly when you receive those bankruptcy notices to get those over to counsel!
Due to the complex nature of the bankruptcy code and the deadlines and mandatory filing requirements, it can be difficult to navigate this area of law without assistance. Please contact your Altitude Law attorneys if you have questions or need help. We will all get through this together (while standing six feet or more away from one another during social distancing).
“For everything you have missed, you have gained something else…” –Ralph Emerson