How Much Debt Could a Woodchuck Chuck if a Woodchuck Could File Bankruptcy?

According to the Bankruptcy Code, if the woodchuck is a member of a housing cooperative, he is not going to get to discharge all of his carrying charges, and if there is a possession judgment against him, the automatic stay may not protect him either.

As part of the Bankruptcy Abuse Prevention Act of 2005, charges which accrue during the time the debtor physically occupies the unit, or, for as long as he holds a legal, equitable or ownership interest in the share of the cooperative are excepted from discharge.

The exception will only apply to charges assessed after the date the debtor files his petition, or, the order for relief. Any charges accrued prior to that date are dischargeable, including charges which accrued during a earlier bankruptcy case if one was pending.

Collection of the assessments which accrue prior to the date an order for relief is filed will be considered a violation of the automatic stay provisions and the protections afforded by an order of discharge. Charges often will continue to accrue after the date of filing which ties the hands of cooperative. The cooperative cannot issue a notice to quit and the cooperative is not receiving any carrying charges. Chapter 7 cases often last no longer than 90 days which means that by the time a motion for relief from the stay is granted and a possession judgment is obtained, close to 60 days will have passed.

The importance of vigilance in the payment and collection of carrying charges is stressed since the Bankruptcy Code also provides for situations where the cooperative already has a judgment for possession. This is helpful if the individual files bankruptcy, continues to accrue charges and his or her bankruptcy is subsequently dismissed. If the cooperative acts quickly enough after the dismissal, it is possible to obtain a judgment before the member decides to file again. In some instances, quick action may result in an exemption from the automatic stay.

Receiving a notice of filing bankruptcy is notice to the cooperative that it must halt all collection efforts as to the debtor. However, it does not mean the member will get to live for free and neither does it necessarily prevent an eviction. Every case is unique and it is strongly advised that all actions halt until proper advice from counsel is obtained.