Rules Of Recovery

Here are notes on collection of an outstanding condominium fee debt:

The levels of priority in order of debt collection:

1. Secured creditors: Entities who have secured the debt with collateral. In this case, it means the home mortgagor, the bank.

2. Creditors with judgment: Entities who have successfully obtained a decree of judgment to pay from bringing suit against someone, e.g. through small claims court.

3. Perfected unsecured creditors: For example, who have filed a lien as we have.

4. Unperfected unsecured creditors: Other creditors.

If a debtor has successfully filed for bankruptcy, including to name us as one of the creditors, then we are notified. In this scenario, there is no further action that we can take. However, if as part of the filing the administrator determines that there are sufficient assets to pay at least a portion owed us, we will be notified of that as well. Filing for bankruptcy (most likely chapter 7 bankruptcy, "liquidation") carries certain consequences against credit rating, etc. so that it is not an appealing measure to take.

If we bring suit in small claims court, the maximum that can be sought is $10,000. It is not yet clear whether associated legal fees and interest are counted against this maximum. As a "corporation," a condominium association would be required to be represented by counsel.

A judgment in our favor would have impacts on credit report and as well as public record. It allows us to examine his tax and other financial records. One avenue to obtain payment would be garnishment of wages, which could have adverse effect on his employment.

Resident awareness of our covenants is helpful. It could be useful to obtain signed copy from new unit owners as to their preferred way to receive notifications, as well as to present Declaration and By-Laws. Also, we could annually update and send out a directory to all residents which includes copy of the Declaration and By-Laws.