Jan 2018

YEAR IN REVIEW... from page 12.

“secured only by a security interest in the debtor’s principal residence”. 11 U.S.C. § 1322 (b) (2) The most recent case, In Re: Holmes, 573 B.R. 549 (September 19, 2017), Judge Gambardella held, in substance, that since the lien is enti- tled to priority, it is partially secured by an interest in the debtor’s principal residence and no portion of the lien could be modified or crammed down pursuant to 11 U.S.C. § 1322 (b) (2). See also, Whispering Woods Condominium Association, Inc. v. Rones, 551 B.R. 162 (D.N.J. 2016). Under this line of reasoning, the entire lien (priority and non-priority) is entitled to payment. Hence, if the condomini- um lien is entitled to priority, the entire pre-petition claim will be paid in full. In contrast, at least two other New Jersey decisions have held that the prior- ity lien is both a statutory lien (N.J.S.A. § 46:8B-21 (b) (1)) and a consensual created by virtue of the governing doc- uments. Under this line of reasoning, the condominium possesses a secured claim represented by the priority portion which must be paid in full and the bal- ance of the lien (non-priority portion) is treated as consensual lien that is treated as a general unsecured lien entitled to payment of a percentage along with general unsecured creditors. In Re: Smiley, 569 B.R. 377 (D.N.J. July 12, 2017); see also, In Re: Keise, 564 B.R. 255 (D.N.J. March 2, 2017). Until the issue is finally determined and settled, community association practitioners will continue to advocate using the reasoning set forth in the Holmes and Rones decisions. n

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