HOA bankruptcy and member liabilities

This Foxwood Hills HOA (SC)  bankruptcy event is every important for all to understand what’s going on.  I am offering my views based on the article and my knowledge of the bankruptcy procedure, which I have some familiarity.  The article also shows first-hand the liability attached to your HOA membership that comes under the heading of “joint and several liability” (J&S), mentioned several times in my materials.

Basically, the phrase applies to all members of a sued party in  a lawsuit whereby the total monetary damages can be collected from any one or all the members of the party. It’s like  a partnership where the debt can be collected from the partners who can pay to pay for all total debt when others cannot make the payment. 

Here, as I read the article,  we have the HOA unable to collect assessments from its members to cover its budgeted expenses, and so decided to apply a J&S policy and “tax” only the members who have not abandoned  or disowned their property — those who could pay. The plaintiff, Busbee, filed suit and said this isn’t right. Foxwood didn’t amend its CC&Rs to permit such unequal treatment of its members. There is no covenant for the HOA to do this.  In HOA-Land it would require a court order or member approval – yeah, right!

A bankruptcy is usually filed because revenues are less than monetary payouts and the prospect is dim in making the finances balance.  Under Chapter 11, as Foxwood filed, it submits a plan to make payments on its debt and is obviously a give and take negotiations between the creditors and Foxwood as the debtor. Detailed financials are submitted including who are the creditors and what money is owed the HOA, which is essentially the assessments not being paid by the members.

Here, as I see it, the HOA filed bankruptcy in anticipation of the outstanding lawsuit which could require not the payments from the members, but for Foxwood to pay back the alleged excessive dues collected by Foxwood.  The decision by the bankruptcy court rests on the outcome of the lawsuit as it needs a precise and legal statement of Foxwood’s financial status.

4 thoughts on “HOA bankruptcy and member liabilities”

  1. George…glad to see you are sill working at exposing the illegality and unconstitutionality of the HOA criminal organization. It has been a long and winding road since you begin this avocation but you have done much good in educating the deceived victims of the HOA members around the USA. I would say you are a quasi Martin Luther King, Jr. type of informant. You have not quit in your pursuit to educate the homeowner about the evils and traps of the HOA criminal regime. A few of us have used this information to file suit in Court to expose the FRAUD of the HOA executives…and have won…in my case it was: ” a settlement out of court by HOA attorney to avoid the embarrassment of being exposed for HOA violating Civil Rights, USA Constitution, Right to Privacy Law, Fair Debt Collection Practices Act and violation of contract law.” The CC&Rs, as you know very well, are corrupt and in violation of civil rights. NO PERSON OR INDIVIDIUAL IS REUIRED BY LAW TO SIGN AND AGREE TO HOA CC&RS IN ORDER TO BUY A HOUSE. NO PERSON IS REQUIRED TO SURRENDER CIVIL RIGHTS AND JOIN AN HOA AS A PRE-CONDITION TO PURCHASE A HOUSE IN ANY COMMUNITY.

    I am surprised that the HOA industry has been allowed to exist in a county that has many laws against it. George, you should lead the charge in a massive national CLASS ACTION LAW SUIT to require the federal government to terminate [ CEASE AND DESIST ] the HOA farce.

  2. You know it’s those little words we just overlook thinking they are standard and harmless! When things go right, everything is fine but when things go wrong … well that’s another matter. I bet even consulting with a Real Estate attorney PRIOR to buying into an HOA a potential member would not be made aware of “joint and several liability” and it’s potential to do harm.

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