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“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
YEAR IN REVIEW...
from page 12.