504 B.R. 409
Bankr. D. Md.2014Background
- Debtor filed Chapter 13 and confirmed a plan providing 60 monthly payments of $95 and surrender of a condominium unit; Debtor does not live in the unit and cannot afford both plan payments and ongoing condo assessments.
- Condominium Association filed a secured proof of claim for $2,974.43 (monthly fee $292.43 plus late fees) and sought relief from the automatic stay to collect post-petition assessments.
- Debtor opposed lift of stay, arguing post-petition assessments must wait until plan completion/discharge; Debtor had an opportunity earlier to propose transfer of the unit but did not.
- Property value is about one-third of total secured claims; senior mortgagee (GMAC) has not foreclosed and other secured creditors have remained inactive.
- Legal tension: post-petition condominium assessments can be characterized as covenants running with the land (in rem) while §523(a)(16) and §1328(a)(2) govern personal liability and discharge in Chapters 7 and 13.
Issues
| Issue | Plaintiff's Argument (Condominium) | Defendant's Argument (Debtor) | Held |
|---|---|---|---|
| Whether post-petition condo assessments are nondischargeable personal obligations in Chapter 13 | Assessments survive bankruptcy as obligations tied to the unit and should be collectible | Assessments should remain stayed until discharge; personal liability should be discharged under §1328(a) | Court: Post-petition assessments are not excepted by §1328(a); personal liability is discharged after Chapter 13 completion, but the covenant survives as an in rem obligation until discharge occurs |
| Whether the automatic stay should be lifted to permit collection of post-petition assessments | Relief is proper because association is entitled to collect post-petition assessments against the unit/owner | Stay should remain to allow Debtor to fund confirmed plan and reorganize | Court: Lifted; association may pursue collection (debtor remains personally liable until plan completion/discharge) |
| Effect and applicability of 11 U.S.C. §523(a)(16) (added 2005) to Chapter 13 discharges under §1328(a) | §523(a)(16) demonstrates congressional intent to preserve personal liability for post-petition HOA dues | §523(a)(16) does not by its text apply to discharges under §1328(a) and thus should not prevent Chapter 13 discharge of personal liability | Court: §523(a)(16) applies to certain discharges (e.g., Chapter 7) but is not listed among §1328(a) exceptions; thus personal liability is not preserved by §523(a)(16) after a §1328(a) discharge (though in rem covenant survives) |
| Whether the condominium lien survives bankruptcy and can be enforced in rem after discharge | Lien survives and assessments run with the land; enforcement against the property is proper post-discharge | Debtor emphasizes lack of personal benefit and practical hardship of ongoing liability | Court: Lien and covenant run with the land survive; condominium’s in rem rights remain enforceable even if personal liability is discharged after Chapter 13 completion |
Key Cases Cited
- River Place East Housing Corp. v. Rosenfeld, 23 F.3d 833 (4th Cir. 1994) (post-petition condo assessments treated as covenant running with the land; personal liability survives Chapter 7 discharge under prior law)
- In re Hamlett, 322 F.3d 342 (4th Cir. 2003) (discusses treatment of liens and passage of secured rights through bankruptcy)
- Johnson v. Home State Bank, 501 U.S. 78 (U.S. 1991) (discharge extinguishes personal liability but liens pass through bankruptcy)
- In re Canning, 706 F.3d 64 (1st Cir. 2013) (debtor cannot compel secured creditor to accept surrender under §1325(a)(5)(C))
- In re King, 208 B.R. 376 (Bankr. D. Md. 1997) (obligation to pay condominium fees continues after debtor’s discharge; covenant runs with the land)