Vandeventer Black

Harvey Selected as General Counsel for the Associated General Contractors of Virginia

Harvey Selected as General Counsel for the Associated General Contractors of Virginia

Vandeventer Black partner, James R. Harvey, has been selected to be the General Counsel for the Associated General Contractors of Virginia (AGCVA). It is the largest construction trade organization in the state. "I am honored to be part of such an honorable organization that has helped shape Virginia's construction industry," said Harvey. "Undoubtedly, AGCVA is a leader in the construction industry and is focused on ...
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Commercial Real Estate Attorneys Recognized as 2021 Top Lawyers of Coastal Virginia

Attorneys from the Norfolk-based business and litigation law firm, Vandeventer Black, have been recognized as Top Lawyers of Coastal Virginia for 2021. This distinction is a peer-rated nomination given to those lawyers who exemplify excellence in their specialty. Commercial Real Estate Practice Group Manager Christopher Ambrosio and attorney Richard J. Crouch were among the Vandeventer Black Top Lawyers recipients for 2021. Previous recognitions for Vandeventer ...
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Vandeventer Black Wins Gold on the 2021 CoVaBiz Best Of Business Awards

Vandeventer Black Wins Gold on the 2021 CoVaBiz Best Of Business Awards

Vandeventer Black LLP has won gold in the 2021 CoVaBiz Best of Business (BOB) awards in six categories. The annual BOB awards recognize Coastal Virginia companies that excel in their industries and help make communities more dynamic. The Firm received awards in the following categories: Best Law Firm Overall Best Intellectual Property Firm Best Employment Law Firm Best Tax Law Firm Best Real Estate Law ...
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Vandeventer Black Helps Raise Over $10k for the United Way of South Hampton Roads

Vandeventer Black Helps Raise Over $10k for the United Way of South Hampton Roads

Vandeventer Black LLP joined efforts with the United Way of South Hampton Roads 2020 campaign where the firm successfully raised a total of $10,570, which will help provide: 1,000 books for children School supplies for one academic school year for over 640 children 400 hygiene kits for homeless veterans 80 days of home visits for an isolated senior    Seven summer camp scholarships Vandeventer Black has ...
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Vandeventer Black raises over $13K during the Legal Food Frenzy Redux

Vandeventer Black raises over $13K during the Legal Food Frenzy Redux

For the past 18 years, Vandeventer Black LLP has been a proud sponsor of the Foodbank of Southeastern Virginia and the Eastern Shore. The firm has participated in the statewide food bank fundraising event, 'Legal Food Frenzy,' since its inception. In the past, the Legal Food Frenzy was a points-based competition based on money, food donations, and volunteer time. However, as everyone is aware, 2020 ...
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Vandeventer Black LLP ranked in 2021 "Best Law Firms"

Vandeventer Black LLP ranked in 2021 “Best Law Firms”

For the tenth consecutive year, U.S. News & World Report and Best Lawyers® announce the "Best Law Firms" rankings. Vandeventer Black LLP has ranked in the 2021 U.S. News - Best Lawyers® "Best Law Firms" list regionally in 23 practice areas. The 2021 "Best Law Firms" list recognizes professional excellence with persistently impressive ratings from clients and peers. Achieving a ranking symbolizes quality law practice and breadth of legal expertise. The ...
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Valuing Rights Taken

The applicable measure of damages in a condemnation proceeding for the court and jury is the DIFFERENCE between the fair market value of the ENTIRE TRACT immediately prior to the taking and the fair market value of the REMAINDER immediately after the taking.  The only situation in which the fair market value of the property taken can exceed the difference between the fair market value ...
Read More
TENTANT RIGHTS

Valuation of Temporary Easements

Typically, the principles and techniques applied in appraising the land taken in an easement acquisition are the same as those applied in other condemnation appraisals.  J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995).  Under the before and after rule, the appraiser simply values the property before and after the easement acquisition.  The measure of damages is the loss of salable utility to both ...
Read More
TENTANT RIGHTS

Valuation of Temporary Easements

Typically, the principles and techniques applied in appraising the land taken in an easement acquisition are the same as those applied in other condemnation appraisals.  J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995).  Under the before and after rule, the appraiser simply values the property before and after the easement acquisition.  The measure of damages is the loss of salable utility to both ...
Read More
american dollar bills

Bankruptcy Basics for Community Association Boards of Directors

Over the last decade, community associations (like other businesses) have been forced to navigate the “Great Recession” and continued recovery.  The “Great Recession” brought with it a significant increase in the number of personal bankruptcy filings across the country.  Even now, personal bankruptcy filings continue to impact communities and their ability to collect assessments. It is a common thought that the filing of a bankruptcy ...
Read More
Attorney_Mark T. Coberly

Mark T. Coberly elected to the Board of Directors of U.S. Maritime Law Association

Vandeventer Black’s partner and head of the Maritime Law Practice Group, Mark T. Coberly, was recently elected to the Board of Directors of the Maritime Law Association of the United States (MLA).  Mark has been active in the MLA since early in his career, and most recently served as Chair of the Fisheries Committee. “We are proud of Mark’s commendable work and commitment to the ...
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Fortune 100 Company Executive Joins Vandeventer Black LLP

Paul Julius recently joined Vandeventer Black LLP as its new Executive Director and Chief Financial Officer. Julius is a senior financial executive with more than 25 years of management and financial experience.  He previously served as Director of Finance for an international law firm headquartered in New York City. Additionally, he was Chief Financial Officer and Managing Director for a Fortune 100 company in the ...
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Vandeventer Black LLP Relocates its Richmond Office

On January 6, Vandeventer Black officially relocated its downtown Richmond, VA office to Riverfront Plaza, West Tower at 901 East Byrd Street, Suite 1600 however, their phone numbers, post office box and email addresses will remain the same. The Richmond office is one of the firm’s five law offices that provides legal services across a wide variety of business industries which include: Accounting Malpractice, Construction ...
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norfolkoffice

Vandeventer Black 15th Largest Law Firm in Virginia

For more than a century, Vandeventer Black LLP has served the interests of its clients. Virginia Business Magazine recently ranked the firm number 15 of the 50 Largest Virginia Law Firms. The firm’s primary focus has been to provide outstanding legal advice, experienced insight and knowledge to clients. The firm’s attorneys have received many honors, including: Virginia Legal Elite, Best Lawyers in America, Lawyers of ...
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Guidance for Virginia Contractors heading South of the Border (to North Carolina)

Guidance for Virginia Contractors heading South of the Border (to North Carolina)

Are you a Virginia contractor doing business in North Carolina? If so, there are few things you should know about.  Before you even put a bid on a project to be a general contractor, if the project is going to cost $30,000 or more, you need to be a licensed North Carolina contractor.  If you aren’t, you run a very real risk of not getting ...
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food frenzy 1

Vandeventer Black LLP Awarded for Support of Virginia Food Bank

Vandeventer Black LLP was awarded second place in the Large Law Firm (101+) Per Capita division in the 2016 Legal Food Frenzy Awards after raising 470 pounds of food per person. The Food Frenzy was held earlier this year and this is the sixth consecutive year Vandeventer Black LLP has participated. “It was great seeing all of the local firms come together for such a ...
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food frenzy 1

Vandeventer Black LLP Awarded for Support of Virginia Food Bank

Vandeventer Black LLP was awarded second place in the Large Law Firm (101+) Per Capita division in the 2016 Legal Food Frenzy Awards after raising 470 pounds of food per person. The Food Frenzy was held earlier this year and this is the sixth consecutive year Vandeventer Black LLP has participated. “It was great seeing all of the local firms come together for such a ...
Read More
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Be wary of of increasing claimed IRS Agent phone calls

Vandeventer Black law partner and tax law practitioner Geoff Hemphill recently relayed a personal experience that others are also increasing seeing involving scam phone calls from persons claiming to be an "IRS Agent" and claiming that the individual owes back taxes. The fake IRS Agent then says the call is the last chance to pay the back taxes before the IRS files a lawsuit. Geoff ...
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Keep It In The Bathroom If You Can: Effects And Implications Of North Carolina House Bill 2

Keep It In The Bathroom If You Can: Effects And Implications Of North Carolina House Bill 2

Authored by Ashley P. Holmes On March 23, 2016, the North Carolina General Assembly passed House Bill 2 (“HB2”), a bill prohibiting and limiting protections for transgender people in a variety of settings. While it is clear that the now infamous “Bathroom Bill” has become a lightning rod issue in an election year, what is less clear is how, exactly, HB2 will intersect with existing ...
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New Legislation Prohibiting Use of Experience Modification Factor For Contractor Eligibility

One of the new legislative changes that goes into effect in Virginia on July 1, 2016 is a prohibition against using any experience modification factor as a condition of any bidder's or offeror's eligibility to participate in a solicitation for construction. Interestingly, while the prohibition was added to the Virginia Public Procurement Act (VPPA), the language in the act expands application to both VPPA and ...
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Vandeventer Black

Harvey Selected as General Counsel for the Associated General Contractors of Virginia

Vandeventer Black partner, James R. Harvey, has been selected to be the General Counsel for the Associated General Contractors of Virginia (AGCVA). It is the largest construction trade organization in the state.

I am honored to be part of such an honorable organization that has helped shape Virginia’s construction industry,” said Harvey. “Undoubtedly, AGCVA is a leader in the construction industry and is focused on growing member businesses through networking, educational and legislative programs, and activities.”

Harvey is a member of the firm’s Executive Board responsible for the governance and operations of Vandeventer Black and serves on numerous municipal, professional, and civic boards and committees.  He is the former Chair of the Norfolk Board of Zoning Appeals. He is the past-president of the Norfolk & Portsmouth Bar Association, its foundation, and a past chair of the Virginia Bar Association’s Construction and Public Contracts Section. 

Harvey has a wide range of knowledge and experience in construction, construction defect, surety, government contracts, land use, permitting, property damage, business and corporate disputes

business business business business business

Commercial Real Estate Attorneys Recognized as 2021 Top Lawyers of Coastal Virginia

Attorneys from the Norfolk-based business and litigation law firm, Vandeventer Black, have been recognized as Top Lawyers of Coastal Virginia for 2021. This distinction is a peer-rated nomination given to those lawyers who exemplify excellence in their specialty. Commercial Real Estate Practice Group Manager Christopher Ambrosio and attorney Richard J. Crouch were among the Vandeventer Black Top Lawyers recipients for 2021.

Previous recognitions for Vandeventer Black attorneys include Best Lawyers in America, Lawyers of the Year, Virginia Business Legal Elite, and Virginia Super Lawyers.

Vandeventer Black Wins Gold on the 2021 CoVaBiz Best Of Business Awards

Vandeventer Black LLP has won gold in the 2021 CoVaBiz Best of Business (BOB) awards in six categories. The annual BOB awards recognize Coastal Virginia companies that excel in their industries and help make communities more dynamic.

The Firm received awards in the following categories:

  • Best Law Firm Overall
  • Best Intellectual Property Firm
  • Best Employment Law Firm
  • Best Tax Law Firm
  • Best Real Estate Law Firm
  • Best Corporate Law Firm

Companies received nominations and votes from members of Coastal Virginia’s business community in more than 75 categories.

Vandeventer Black Helps Raise Over $10k for the United Way of South Hampton Roads

Vandeventer Black LLP joined efforts with the United Way of South Hampton Roads 2020 campaign where the firm successfully raised a total of $10,570, which will help provide:

  • 1,000 books for children
  • School supplies for one academic school year for over 640 children
  • 400 hygiene kits for homeless veterans
  • 80 days of home visits for an isolated senior   
  • Seven summer camp scholarships

Vandeventer Black has been a strong supporter of the United Way of South Hampton Roads and has contributed over $100,000 to the organization through employee contributions and sponsorships.

Vandeventer Black raises over $13K during the Legal Food Frenzy Redux

For the past 18 years, Vandeventer Black LLP has been a proud sponsor of the Foodbank of Southeastern Virginia and the Eastern Shore. The firm has participated in the statewide food bank fundraising event, ‘Legal Food Frenzy,’ since its inception.

In the past, the Legal Food Frenzy was a points-based competition based on money, food donations, and volunteer time. However, as everyone is aware, 2020 has changed many charitable events. This year’s competition took place as an online money donation campaign, continuing the partnership between the legal community and Virginia’s Food Banks during this difficult time. Several regional Foodbanks in Virginia participated, including the Foodbank of Southeastern Virginia and the Eastern Shore.

Considering tightening budgets, the Foodbank of Southeastern Virginia and the Eastern Shore set a relatively modest goal of $10,000 for this event. Undaunted by the challenges of 2020, the Hampton Roads legal community stepped up to the plate and donated over $30,000 to the local Foodbank.  Vandeventer Black and its employees donated $13,282.

Vandeventer Black attorneys participated in a competition wherein employees could allocate their donations to attorneys throughout the firm. The attorneys with the highest allocations either matched the allocation or received a pie to the face. “Partner Pie Pandemonium (“PPP,” get it?) was a great internal fundraiser and a morale booster for our Team,” said Daniel Salmon, an associate and coordinator of this year’s Legal Food Frenzy Redux. “With the majority of the firm working from home, PPP allowed the firm to come together and what a great way to give back to the local community during these times.”

Vandeventer Black LLP ranked in 2021 “Best Law Firms”

For the tenth consecutive year, U.S. News & World Report and Best Lawyers® announce the “Best Law Firms” rankings. Vandeventer Black LLP has ranked in the 2021 U.S. News – Best Lawyers® “Best Law Firms” list regionally in 23 practice areas.

The 2021 “Best Law Firms” list recognizes professional excellence with persistently impressive ratings from clients and peers. Achieving a ranking symbolizes quality law practice and breadth of legal expertise. The 2021 Edition of “Best Law Firms” includes rankings in 75 national practice areas and 127 metropolitan-based practice areas.

Vandeventer Black LLP received the following rankings in the 2021 U.S. News-Best Lawyers “Best Law Firms”:

Norfolk

  • Admiralty & Maritime Law
  • Banking and Finance Law
  • Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law
  • Business Organizations (including LLCs and Partnerships)
  • Closely Held Companies and Family Businesses Law
  • Commercial Litigation
  • Construction Law
  • Corporate Law
  • Employment Law – Management
  • Environmental Law
  • Financial Services Regulation Law
  • Labor Law – Management
  • Litigation – Banking & Finance, Construction & Environmental
  • Mortgage Banking Foreclosure Law
  • Transportation Law
  • Personal Injury Litigation – Defendants
  • Project Finance Law
  • Tax Law

Richmond

  • Commercial Litigation
  • Construction Law
  • Insurance Law
  • Litigation – Construction & Securities
  • Securities / Capital Markets Law
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Valuing Rights Taken

The applicable measure of damages in a condemnation proceeding for the court and jury is the DIFFERENCE between the fair market value of the ENTIRE TRACT immediately prior to the taking and the fair market value of the REMAINDER immediately after the taking.  The only situation in which the fair market value of the property taken can exceed the difference between the fair market value of the property before and after the taking under N.C. Gen. Stat. § 40A-64 is where there is a special benefit offset.

All factors pertinent to a determination of what a buyer – willing to buy but not under compulsion to do so – would pay and what a seller – willing to sell but not under compulsion to do so – would take for the ENTIRE PROPERTY must be considered in arriving at the compensation to which a landowner is entitled.  The compensation for the taking must be full and complete. Such compensation includes everything which affects the value of the ENTIRE PROPERTY before the taking and the REMAINDER after the taking.   The adverse impacts of the Project must be considered in assessing damages.

A condemnor must pay for the rights taken, not what it actually does on the propertyCarolina Central Gas Co. v. Hyder, 241 N.C. 639, 642, 86 S.E.2d 458, 460 (1955) (“[I]n assessing damages for easement rights, it is not what the condemner or grantee actually does, but what it acquires the right to do that determines the quantum of damages.”) (citations omitted).

To properly evaluate an easement acquisition, the appraiser must know precisely how the easement will be used, what rights are to be acquired, and how responsibilities as to the easement will be divided by the parties.  The full impact of an easement acquisition cannot be estimated until the appraiser determines: (1) the loss of present utility, (2) loss of future utility, (3) accessory rights to be acquired, and (4) the obligations of the parties. Accessory rights (secondary easements) may include the right to maintain the easement area including the right to enter onto the property for inspection, repair and/or replacement.

Damages to land due to the imposition of an easement can range from 0% to 100% of the easement area’s fee value.  J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995).

Under N.C. Gen. Stat. §40A-66(a), “[i]f there is a taking of less than the entire tract, the value of the remainder on the valuation date shall reflect increases or decreases in value caused by the proposed project including any work to be performed under an agreement between the parties.”

TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS

Valuation of Temporary Easements

Typically, the principles and techniques applied in appraising the land taken in an easement acquisition are the same as those applied in other condemnation appraisals.  J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995).  Under the before and after rule, the appraiser simply values the property before and after the easement acquisition.  The measure of damages is the loss of salable utility to both the area encumbered by the easement and the unencumbered portion of the larger parcel.  Id.

However, the condemned property’s loss of fair market value is not the proper measure in temporary easement acquisitions.  When a taking is temporary, the measure of compensation is the value of the property for the period that it is to be held by the condemnor, or the diminution in the value of the property by reason of the owner’s loss of its use and occupancy during the possession by the condemnor.  The most common measure of damages is the rental value of the easement area for the period of occupancy by the condemnor.  Id. at 357-58.

Damages that result from temporary easements are usually based on economic rent of the affected area for the term of the temporary easement.  Id.  If rental information is not available, the appraiser must estimate an appropriate rate of return on the land for the term of the easement.  Id. at 359.  In no case may the appraiser determine that the landowner is not owed just compensation simply because there is not a market for the easement area.  Id. at 357.

One such example is a temporary construction easement.  In most condemnations where a temporary construction easement has been taken, there is not a robust market for the easement area.  And, yet, the condemnor must still pay the landowner just compensation for the easement taken. Therefore, these types of easements are typically valued at a percentage of the overall rental value of the area affected.

As the example above illustrates, appraisers must sometimes value temporary takings where there is no rental market for the taking area.  This is especially common in condemnations where easements may be taken only to accommodate a temporary project, resulting in easement takes of unusual size and shape and of limited utility.  Appraisers may not, however, abandon the valuation process and assign no value to the temporary easement take area just because there is not an actual rental market for it.  Where there is not a market for an easement area the appraiser must “estimate” a rate of return on the temporary easement area.  Many appraisers use 10% as a rate of a return on a temporary construction easement.

If the temporary easement will affect the value of the remaining unencumbered land, this fact must also be considered in estimating the value of the property after the taking.  The location of an easement in relation to improvements on the affected parcel is also an important consideration.

TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS TENTANT RIGHTS

Valuation of Temporary Easements

Typically, the principles and techniques applied in appraising the land taken in an easement acquisition are the same as those applied in other condemnation appraisals.  J.D. Eaton, MAI, SRA, Real Estate Valuation in Litigation (1995).  Under the before and after rule, the appraiser simply values the property before and after the easement acquisition.  The measure of damages is the loss of salable utility to both the area encumbered by the easement and the unencumbered portion of the larger parcel.  Id.

However, the condemned property’s loss of fair market value is not the proper measure in temporary easement acquisitions.  When a taking is temporary, the measure of compensation is the value of the property for the period that it is to be held by the condemnor, or the diminution in the value of the property by reason of the owner’s loss of its use and occupancy during the possession by the condemnor.  The most common measure of damages is the rental value of the easement area for the period of occupancy by the condemnor.  Id. at 357-58.

Damages that result from temporary easements are usually based on economic rent of the affected area for the term of the temporary easement.  Id.  If rental information is not available, the appraiser must estimate an appropriate rate of return on the land for the term of the easement.  Id. at 359.  In no case may the appraiser determine that the landowner is not owed just compensation simply because there is not a market for the easement area.  Id. at 357.

One such example is a temporary construction easement.  In most condemnations where a temporary construction easement has been taken, there is not a robust market for the easement area.  And, yet, the condemnor must still pay the landowner just compensation for the easement taken. Therefore, these types of easements are typically valued at a percentage of the overall rental value of the area affected.

As the example above illustrates, appraisers must sometimes value temporary takings where there is no rental market for the taking area.  This is especially common in condemnations where easements may be taken only to accommodate a temporary project, resulting in easement takes of unusual size and shape and of limited utility.  Appraisers may not, however, abandon the valuation process and assign no value to the temporary easement take area just because there is not an actual rental market for it.  Where there is not a market for an easement area the appraiser must “estimate” a rate of return on the temporary easement area.  Many appraisers use 10% as a rate of a return on a temporary construction easement.

If the temporary easement will affect the value of the remaining unencumbered land, this fact must also be considered in estimating the value of the property after the taking.  The location of an easement in relation to improvements on the affected parcel is also an important consideration.

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Bankruptcy Basics for Community Association Boards of Directors

Over the last decade, community associations (like other businesses) have been forced to navigate the “Great Recession” and continued recovery.  The “Great Recession” brought with it a significant increase in the number of personal bankruptcy filings across the country.  Even now, personal bankruptcy filings continue to impact communities and their ability to collect assessments.

It is a common thought that the filing of a bankruptcy petition eliminates a community association’s ability to collect past due assessments.  This is not always true.  But, a number of factors will impact a community association’s ability to claim and collect, debts in bankruptcy.

This brief overview is intended to provide community association boards of directors with a basic understanding of the impact a bankruptcy filing may have on the association’s ability to collect past-due assessments, along with important factors for a board to consider as they consider the appropriate course of action.

As always, the following is provided as general information.  Because of the complexity of bankruptcy law (and the law in general), association rights and responsibilities should be promptly reviewed by counsel for the association on a case-by-case basis.  The following cannot be substituted for legal advice.

Common Types of Bankruptcies in Community Associations

The two most common types of bankruptcy filings faced by community associations are those filed under Chapter 7 and Chapter 13 of the Bankruptcy Code.

A Chapter 7 bankruptcy is a “liquidation” of assets in exchange for a discharge of debts and is the most common type of bankruptcy filing in the United States.

When a Chapter 7 bankruptcy is filed, a Trustee (the “Chapter 7 Trustee”) is appointed.  This Chapter 7 Trustee is empowered to take control of all legal or equitable interests of the debtor in personal and real property held by the debtor at the time of the bankruptcy filing, liquidate or sell those interests and distribute the proceeds to secured creditors (with excess proceeds distributed to unsecured creditors on a pro-rata basis).  These interests are referred to the as the bankruptcy estate.

A Chapter 13 bankruptcy provides for an adjustment (really, a “reorganization”) of debts of an individual with regular income.  A Chapter 13 bankruptcy allows a debtor to keep property and pay debts over time, usually three to five years, through an approved plan.

An Owner has filed for Bankruptcy Protection, What Happens Now?

Bankruptcy cases are opened upon the filing of a bankruptcy petition by the debtor (or, in some cases, by creditors) in a bankruptcy court.

The filing of a bankruptcy petition immediately initiates the automatic stay.  The automatic stay is an injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed, and remains in place until the bankruptcy case is either dismissed or the debtor is discharged.

Certain potential violations of the automatic stay by community associations are obvious – sending a letter to the debtor demanding repayment of a pre-petition debt, filing suit or continuing to pursue a judgment after a bankruptcy petition is filed (a bankruptcy search using the debtor’s name should be done before any suit is filed), or initiating a garnishment to collect a pre-petition debt.

Other violations are less obvious – initiating foreclosure actions, suspending the right to vote, suspending the right of the debtor to use facilities or services (e.g., pool, gate or elevator access) for non-payment of assessments, or taking actions against co-debtors (including spouses and other co-owners in a Chapter 13 bankruptcy).

In a Chapter 13 bankruptcy, if a unit or lot is owned by multiple owners and is a delinquent in the payment of assessments, the automatic stay protects all co-debtors, even if only one files for bankruptcy protection.  These actions threaten portions of the bankruptcy estate, which are protected by the automatic stay.

Despite the automatic stay, assessments that accrue after the date the bankruptcy petition are filed (post-petition assessments) remain the legal obligation of the debtor and are not discharged in bankruptcy.

Within the first few weeks after the filing of a Chapter 7 bankruptcy, a notice of the commencement of case is sent to all creditors listed in the bankruptcy petition and schedules.  The recordation of a lien and commencement of a timely civil suit can both ensure inclusion in the list of creditors.

Within forty or fifty days (depending on the type of protection sought) of the filing of a bankruptcy petition, a creditor’s meeting (also called a 341 meeting) is held.  A 341 meeting is an out-of-court meeting that allows the debtor to be questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs.

A community association board of directors should consider engaging association legal counsel to file a proof of claim (a form-based written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money) any time an owner delinquent in the payment of assessments files for bankruptcy protection, unless the amount of assessments owed is very small.

If a community association fails to file a proof of claim, the association will be precluded from sharing in any distribution made to creditors as part of the bankruptcy case.  The proof of claim filed by an association will include all amounts owed to the association prior to (and including) the date the bankruptcy petition was filed, and should include all unpaid assessments, late fees, and interest, plus any court-awarded costs of collection, and court-awarded attorneys’ fees (unless the governing documents provide otherwise).

Even in a Chapter 7 bankruptcy, a portion of a community association claim may be secured (backed by a lien) and will have be paid before unsecured portions.  In a Chapter 13 bankruptcy, the proof of claim will be used to determine disbursements made by the Chapter 13 trustee.

Chapter 7 bankruptcies are addressed relatively quickly, with many debtors granted a discharge within six months of filing.  An experienced bankruptcy attorney can assist in determining whether the association should participate in a Chapter 7 bankruptcy beyond the filing of a proof of claim.

If a debtor, for example, indicates an intention to retain the unit or lot and the association previously recorded enforceable liens, the association can enforce its liens even after the bankruptcy case ends.  The association assessment lien, therefore, is a powerful tool in protecting the association from dischargeable personal debt in bankruptcy.

Chapter 13 bankruptcies are not addressed as quickly as those filed under Chapter 7 and may take several years (many last five years) to reach final resolution.  After a Chapter 13 bankruptcy is filed, the debtor files a plan – a detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.  The plan is also mailed to creditors (and is sometimes the first notice a creditor has a Chapter 13 filing).

In a Chapter 13 bankruptcy, the prior recordation of a lien is even more critical than in a Chapter 7 bankruptcy.  If unpaid assessments are secured by lien, those assessments will oftentimes be paid (over time).  There are instances, however, when the value of secured claims exceed the value of the collateral.  In those instances, the portion of secured claims that exceed the collateral will be considered unsecured.  This process of converting a secured claim to an unsecured claim is called lien stripping or cramming down.  Association bankruptcy counsel can assist in ensuring that assessment liens are treated as secured debts.

After a plan is approved, plan payments are made from the debtor to the Chapter 13 trustee.  Payments are then made from the Chapter 13 trustee to the creditors as provided in the approved plan.  Post-petition assessments (i.e., those that came due after the bankruptcy petition was filed) in a Chapter 13 plan must also be paid on time.

Associations must be able to track pre-petition and post-petition payments and ensure that payments are applied correctly.  Separate accounts should be established for pre-petition and post-petition debts to ensure proper tracking.

Conclusion

With these basics, community association boards of directors should have a basic understanding of the impact a bankruptcy filing may have on the association’s ability to collect past-due assessments, along with factors for a board to consider as they consider the appropriate course of action.

Because of the complexity of bankruptcy law (and the law in general), association rights and responsibilities should be promptly reviewed by counsel for the association on a case-by-case basis.

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