Bankruptcy Issues for Community Associations
By Jay Shearer, Esq.
August 14th, 2020
The purpose of bankruptcy laws is to provide an opportunity for a fresh start to honest but unfortunate individuals (or debtors in the bankruptcy context) and to allow for the equal treatment of creditors who may be owed money. The successful completion of a bankruptcy plan generally entitles the debtor to a discharge of certain debts. The discharge of a debt prevents creditors from later attempting to collect the discharged debt. Additionally, 11 U.S.C §362(a) imposes an automatic stay on any collection activity against the debtor or their assets. The automatic stay begins immediately upon the filing of a bankruptcy petition and acts as a temporary injunction preventing collection activity by creditors. Generally, the automatic stay will remain in place during the life of the bankruptcy proceedings unless the creditor obtains a court order granting relief from the automatic stay.
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