Skip to main content

Exit WCAG Theme

Switch to Non-ADA Website

Accessibility Options

Select Text Sizes

Select Text Color

Website Accessibility Information Close Options
Close Menu
Law Offices of Carol M. Galloway, P.A. Jacksonville Bankruptcy Lawyer
  • Schedule a Free Consultation
  • ~
  • Payment Plans Available

The Difference Between A Secured And Unsecured Debt In Chapter 13 Bankruptcy


One advantage of filing for Chapter 13 bankruptcy over Chapter 7 is that the former can help you get current with your secured debts. For example, if you fall behind on your mortgage payments but want to keep your house, a Chapter 13 repayment plan can help you accomplish that. Chapter 7 has no such provision for repayment plans, which means in most cases a secured property must be surrendered to the lender.

Florida HOA’s Own Bylaws Deprived It of Secured Creditor Status

Of course, bankruptcy can also help you establish whether or not a debt is actually secured by the creditor. There was a recent Florida bankruptcy decision, In re Clement, on this very point. Here the issue was not a mortgage but rather a homeowners association lien.

The facts of the case are fairly straightforward. The debtors in this case own a home. Their homeowners association had previously sued the debtors, alleging they had installed a fence in violation of the HOA’s declaration of covenants. The parties reached a partial settlement. The debtors agreed to remove the offending fence but still contested the issue of whether they had to pay the HOA’s legal fees and expenses in connection with the case.

A Florida Circuit Court judge denied the HOA’s request for fees and expenses. An appeals court subsequently reversed that decision. But before the Circuit Court could actually determine the amount of money the debtors owed, they filed for Chapter 13 bankruptcy. This then led to a dispute in the bankruptcy court over whether the award of legal fees in the fence case represented a “secured claim” against the debtors’ property.

The bankruptcy court explained that under Florida law governing homeowners association, the HOA’s lien would normally have been “effective when their right to payment arose,” which was before the debtors filed for bankruptcy. So under a strict application of the law, the HOA’s claim was secured in bankruptcy.

But that was not the end of the matter. Florida law also states that an HOA is bound by the terms of its own declaration of covenants, which represents a binding legal contract between the HOA and the homeowners. In this case, the HOA’s declaration and bylaws stated that a claim for legal fees and expenses against a homeowner was “effective only from and after” the recording of a statement in the public land records. Since the HOA never recorded such a statement before the debtors’ bankruptcy filing, they could not now treat their legal fees and expenses as a secured claim against the debtors’ property. The HOA was essentially bound by its own rules on the subject.

Contact Jacksonville Bankruptcy Lawyer Carol M. Galloway Today

Sorting out secured and unsecured claims is often a complex task when it comes to bankruptcy cases. That is why it is important to work with a qualified Jacksonville Chapter 13 bankruptcy attorney who is intimately familiar with the law in this area. If you are thinking about filing for bankruptcy and need to speak with someone, contact the Law Offices of Carol M. Galloway, P.A., today to schedule a free consultation.


Facebook Twitter LinkedIn
Skip footer and go back to main navigation