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Bankruptcy Judge Sells House Despite "Stubborn" Bank's Objections

Posted By admin || 12-Jul-2011

Bankruptcy Judge Sells House Despite

In a case that is being described as unprecedented, a bankruptcy judge has sold the home of a bankruptcy debtor after the bank failed to take possession and in turn left the debtor with ongoing HOA fees.

In his ruling, Judge George Paine II ordered Pigg's bankruptcy reopened so that a trustee can sell the home, with the proceeds going first to the homeowner's association and then the bank. He reasoned that Bank of America has consented to the sale of the flood-damaged condominium through its inaction.

"With the real estate collapse, lenders, who otherwise have the right to do so, are choosing not to foreclose on their collateral leaving homeowners in limbo," Paine wrote. "Congress' broadening of (the bankruptcy code) to protect HOAs deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code."

As many debtors and bankruptcy attorneys have noted, banks refusing to take possession of homes and other assets surrendered in bankruptcy is becoming more common. Unfortunately, banks refusal to take possession of property after bankruptcy can leave debtors with even more debt after their discharge.  In the case of debtors who have surrendered condos, they are still responsible for HOA fees and insurance until the bank literally takes possession.

When the bank refuses to take possession of the property, it can jeopardize the debtor's fresh start after bankruptcy. This bankruptcy judge's ruling is sending a clear sign to creditors that they may stand to lose money if they do not move swiftly to take control of surrendered assets after a debtor's bankruptcy discharge.

Categories: Bankruptcy
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