Understanding How An Owner Bankruptcy Impacts a Homeowners Association

Homeowners associations are frequently confronted with a bankruptcy filing by a homeowner. A bankruptcy filing by a homeowner can have a significant impact on the homeowners association and it is vital that the association’s directors and managers understand how the bankruptcy filing affects the association and what the association should do to protect its interests when it becomes aware of a bankruptcy filing.

There are three basic types of bankruptcies that can affect a homeowners association: (1) a Chapter 7; (2) a Chapter 11; and (3) a Chapter 13. The “Chapter” in each of the different types of bankruptcy refers to the chapter in the United States Bankruptcy Code.