Are post-filing condominium assessments discharged in a bankruptcy?

The short answer, at least in the Eastern District of Michigan, is “no,” whether the debtor has filed a Chapter 7 case or a Chapter 13 case.

In a Chapter 7 case (a straight liquidation:  the debtor gives up nonexempt assets in exchange for a discharge of debts), the Bankruptcy Code specifically provides that a discharge in a Chapter 7 case does not discharge the debtor "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 possessory 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.”  11 USC §5623(a)(16).

In a Chapter 13 case (the debtor devotes his or her future income stream for a period of up to 5 years to payment of debts existing on the date of filing and keeps most assets), the United States District Court for the Eastern District of Michigan has held that post-petition assessments are not discharged in a Chapter 13 case, even if the debtor provides for surrender of the condominium unit.  The debtor’s liability follows ownership of the land; as long as the debtor owns the condominium unit, the debtor remains liable for assessments.

Of course, if the debtor proposes to keep the condominium unit and cure an arrears in a Chapter 13 case, the debtor must pay both the pre-petition and post-petition assessments in full, unless the lien is “stripped” (a topic for another blog post).

© Steve Sowell 2018