Another bankrupt lost when trying to find a loophole that would allow discharging post-filing obligations arising in connection with a home that the debtor intended to abandon.
An owner of a condominium unit filed under chapter 13 owing a $5,000 secured claim to the homeowners’ association. After filing, she ran up another $7,000 in obligations to the association. The day before the association was slated to foreclose her unit, she converted the case to chapter 7.
She contended that the association’s post-filing claim was discharged, citing Section 348(a), which says that conversion of a case from one chapter to another constitutes an order for relief.
Bankruptcy Judge Stephanie W. Humrickhouse of Raleigh, N.C., disagreed, holding that Sections 727(a) and 523(a)(16) are also relevant. In her Jan. 21 opinion, she held that obligations to the association arising after the initial filing were not discharged by virtue of conversion.
Judge Humrickhouse said that this result is unique to condominium assessments. Ordinarily, she said that the “discharge in a converted chapter 7 case would usually cover debts that arose prior to the conversion date.”
When read in conjunction with the other provisions, Section 523(a)(16) changed the ordinary result and means that condominium charges before conversion are not discharged.
Another bankrupt lost when trying to find a loophole that would allow discharging post-filing obligations arising in connection with a home that the debtor intended to abandon.