Bruce Levitt Prevails in NJ Bankruptcy Court Ruling Allowing Chapter 13 Debtors to Strip Off Condo Association Liens
Jun 18, 2015, 08:45 ET
MAPLEWOOD, N.J., June 18, 2015 /PRNewswire/ -- Consumer bankruptcy law firm Levitt & Slafkes has prevailed in a suit where their clients, a married couple that filed Chapter 13 bankruptcy, sought to strip off a condominium association lien as an unsecured debt.
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In In re Rones, Case No. 14-35899 (Bankr. D.N.J.) the value of the Debtors' condominium unit was below the amount owed on the first mortgage. The condominium association filed a secured claim in the amount of $18,761,76, the amount of its recorded liens.
The Debtors had received a loan modification, but did not have sufficient funds to pay the secured claim of the association in full. On behalf of the Debtors, Bruce Levitt of Levitt & Slafkes proposed a plan to pay the condominium association the amount of $1,494.00, representing the six-month priority accorded to payment of condominium association charges under New Jersey law.
The association objected, claiming that its sole collateral is the Debtors' principal residence and the priority treatment provided to it under New Jersey law partially secures the lien. It claimed that the Plan treatment violated the anti-modification provision of 11 U.S.C. § 1322(b)(2).
"It is a common problem that condominium associations take the position with the bankruptcy court that their liens are a secured debt that must be paid in full under a Chapter 13 Debtors' Plan," said Levitt. "For the Debtor who is struggling to cure mortgage arrears or just stay current on their mortgage debt, being forced to pay the lien claim may often be the difference between confirming the Plan or not.
In a victory for the Debtors, the Court ruled that where the value of the condominium is less than that amount owed on a mortgage, the condominium association lien constitutes a security interest that can be stripped off as it is wholly unsecured.
Recognizing that the relevant New Jersey statute provides a priority for payment of six months of customary charges of the condominium association over other prior recorded liens, the Court ruled that the bankruptcy plan must provide for payment of that six-month priority amount.
The In re Rones case is the first case in New Jersey and among only a handful of cases throughout the country that directly address this issue.
About Levitt & Slafkes
Levitt & Slafkes is an Essex County, New Jersey consumer bankruptcy and foreclosure defense law firm. The firm concentrates on bankruptcy law, debt relief, foreclosure defense, mortgage modification, and commercial and bankruptcy litigation. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 bankruptcy filings. For more information, visit www.lsbankruptcylaw.com
Bruce H. Levitt, Esq.
SOURCE Levitt & Slafkes
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