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Condo | HOA Lawyers

Foreclosing on a Unit When Owner Discharged in Bankruptcy

The Fair Debt Collection Practice Act (FDCPA) was enacted to protect consumers from unscrupulous debt collectors; as a shield against prohibited acts. However, it is now often used as a sword, by attorneys who are part of a “cottage industry” that simply look for even the smallest of violations and then claim thousands of dollars of attorney fees and damages in their first letter to the alleged violator.

Facts. In the case of Ellison v. Fullett Rosenlund Anderson P.C., No. 17 CV 2236 (N.D. Ill. Sept. 28, 2018) the court found the attorney violated the FDCPA when he sent a notice that stated “THIS IS THE PROPERTY’S NOTICE … that the property is in default…”  However, the attorney mailed the notice to the property, “c/o Joy Ellison.”  Ms. Ellison took the notice to her bankruptcy attorney who presumably explained that she did not owe the debt, but since the test is whether the notice was “facially misleading” to an “unsophisticated consumer” Lox v. CDA, Ltd., 689 F.3d 818, 822 (7th Cir. 2012), the Ellison court found that because the notice stated that a debt of $4,365 was due, that it was sent to Ms. Ellison and that it demanded payment that she was entitled to summary judgment on her claims.

Lesson.  Collection of past due assessments is a tricky business.  If the unit owner has filed for the bankruptcy, the assessment lien on his or her property continues, but the unit owner is discharged.  The notice sent of the debt and lien filing needs to be carefully crafted to avoid FDCPA claims.  This is one area where if you don’t know what you are doing, it is VERY UNLIKELY that you will get it right.

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