Most people are aware that when someone files for bankruptcy, creditors are to cease collection efforts until a court order is issued lifting the automatic stay. A decision this week from the Hawaii Bankruptcy Court involving the automatic stay illustrates the risks of not complying with the automatic stay. The debtor filed an adversarial proceeding against the creditor seeking damages for violating the automatic stay. The creditor is alleged to have sent statements with the amounts owed “for informational purposes”. The court ruled that the complaint stated a valid claim if proven and allowed the claim to go to hearing.
For a community association, this means that statements of accounts should not be sent to a delinquent owner once they have filed for bankruptcy. The only exception would be statements that showed only the amounts that were incurred after the bankruptcy petition has been filed. Since community associations are permitted to seek recovery of post-petition indebtedness, sending a statement for only those amounts is permitted. Failure to follow these procedures could result in the association being sued for damages for violating the automatic stay.
Related issues: FAQ on Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
