In Re Rones Revisited: Court Rules Condo Lien Cannot be Stripped Off

In Re Rones Revisited: Court Rules Condo Lien Cannot be Stripped Off

Don’t leave money on the table by  assuming  that a Chapter 13 bankruptcy filing by an owner wipes out or limits payment of a  condominium  association’s pre-petition claim for unpaid  fees and assessments.

A recent decision of the United States District Court, on appeal from an order of the U.S. Bankruptcy Court, is a solid victory for condominium associations in this regard. The decision impacts the amount of money a condominium association, with a recorded priority lien, will be entitled to receive
when an owner files a Chapter 13 bankruptcy.

Based on the decision, the limited super priority afforded to a condominium claim of lien pursuant to the New Jersey Condominium Act, specifically, N.J.S.A. 46:8B-21 (b)(1), prevents the lien from being stripped off or crammed down under a debtor’s chapter 13 plan. Since the lien was entitled to a limited priority over the first mortgage, and was secured by the debtor’s principal residence, the lien could not be modified or stripped off.

Therefore, under a Chapter 13 plan, the entire lien will secured and not just the limited super priority portion.