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John Finstad v. James Gord

Summarizing by Bradley Pearce

Riverbend Condominium Assoc. v. Green (In the Matter of Green)

Riverbend Condominium Assoc. v. Green (In re Green), No. 14-31117 (5th Cir. July 13, 2015)
Affirmed Bankruptcy and District Court determinations that the privilege created by Louisiana law for all unpaid sums assessed by a condominium association against the condominium owner is a statutory lien (as distinguished from a security interest) and is therefore subject to claim bifurcation under 11 U.S.C. § 1322(b)(2). The Fifth Circuit attached the District Court Order and Reasons, and did not issue a separate opinion.
Procedural context:
Condominium association appealed the bankruptcy court's bifurcation of its claim following the Chapter 13 debtor's Motion to Avoid Lien.
Debtor owned a condominium as his principal residence in New Orleans, Louisiana, subject to an agreement with the condominium association and the Louisiana Condominium Act, which granted the association the right to file a lien against the owner for unpaid dues. The Debtor became delinquent on his dues. The association subsequently recorded a lien and obtained a default judgment for $23,303.72. The association filed a proof of claim in the Debtor’s Chapter 13 proceeding, asserting the entire balance as secured. The association relied on the anti-modification provisions of Section 1322 to support the contention that its secured claim on the debtor’s principal residence was a security interest that could not be modified. In ruling on a “matter of first impression under Louisiana law,” the District Court held that the security interest was premised on a statutory “privilege” created by operation of law, rather than a security interest created by voluntary agreement. Accordingly, the anti-modification provisions of Section 1322 did not apply to the statutory lien, and the debtor was permitted to bifurcate the association’s claim based upon amounts remaining after satisfaction of the primary mortgage lien on the property.

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