• 14
  • July
    2011

In our last post, we began speaking about a recent decision by a Nashville bankruptcy judge in which he sided with a Belleville woman on the issue of whether she was liable for homeowner's association fees after going through bankruptcy.

As we mentioned, that decision involved criticism not only of federal law which makes consumers liable for such expenses after bankruptcy, but also the practice lender practice of drawing out the foreclosure process unnecessarily.

Currently, mortgage lenders typically take over a year to complete a foreclosure. This practice, in the bankruptcy judge's estimation, held the woman in limbo and put her at a disadvantage. In light of that consideration, he requested that the bankruptcy case be reopened to allow the trustee to sell the condominium, so that proceeds from the sale could go to satisfy the homeowner's association bill, after which the Bank of America could collect on its loan.

In his opinion the judge wrote, "Congress' broadening of [federal law] to protect homeowners associations deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code." He also said that the lender-Bank of America-had consented through its inaction to the sale of the woman's flood damaged Bellevue condominium.

Sources said the opinion is unique in that most bankruptcy cases follow the federal bankruptcy code rather strictly. It is expected, however, that the Bank of America will appeal the decision, especially since the home sale will remove the lender's ability to control when they recognize the loss for tax purposes.

Source: The Tennessean, "In rare move, court backs flood victim in foreclosure," Brandon Gee, 6 July 2011.