“For an association to protect its rights, time is of the essence.”

  dischargeable in some circumstances. In the Goudelock case, the debtor surrendered the property in her Chapter 13 plan, the lender subsequently foreclosed on the property and the Association sought to determine that the four years of delinquent post-petition assessments from  lender foreclosed on the property were not dischargeable.

The Association was not able to take action on the property due to the automatic stay during the course of the bankruptcy case. Why or if the Association did   unknown. The Association apparently assumed four years of unpaid assessments for this condominium unit were collectable without seeking relief.

As noted above, generally, post-petition debts are not included in bankruptcy and the debtor would have to continue to pay new debts incurred after the petition   holding that the assessments billed after the petition  ruled in favor of the Association. However, the Court of Appeal reversed that decision, holding that association assessments arise from the purchase of the property and are therefore unmatured, pre-petition debt. As such,

Goudelock’s personal obligation to pay both the pre- petition and post-petition assessments was eliminated when Goudelock was granted a discharge in the bankruptcy case. The court cited public policy to support its holding, explaining that the intent of bankruptcy is to provide the debtor with a fresh start.

In other words, while the law provides that post-petition assessments are not dischargeable in a Chapter 7 bankruptcy, as long as the debtor continues to own, reside in and/or rent out the property, post-petition assessments arise from the pre-petition debt and therefore the debtor’s personal obligation to pay the post-petition assessments is eliminated when the debtor is granted discharge and has relinquished the property during the Chapter 13 case.

The association does retain its in rem rights to foreclose on the property in the event that the post-petition assessments are not paid. However,

if the lender has

already foreclosed on the property due to the debtor’s failure to pay the mortgage, the association loses the opportunity to collect through its own foreclosure proceeding. As an aside, if there are surplus funds resulting from the lender’s foreclosure, the association is entitled to make a claim for that money.

The takeaway from this case is that, in order to preserve the association’s rights to collect and foreclose against the property, it is imperative for an association to record a lien against the property when the assessments become delinquent and before the owner(s) file for bankruptcy. And, now more than ever, it is important for associations to review the debtor’s bankruptcy filings, to preserve its rights.

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