In New Jersey, the United Stated Bankruptcy Court held in In re. Smiley, 569 B.R. 377 (2017) that a Unit Owner/Debtor can modify the Association’s lien and strip off all but the six month super lien allowed under the state’s condominium act.  The facts at the time were that the Association was owed $9,000 for filed liens and another $4,700 that it recognized as unsecured.  At the time of the bankruptcy filing, the monthly assessment was $250.  The fair market value of the property according to the bankruptcy schedules was $142,000, but it was under water because of a $174,000 first mortgage on the property.  Based on these facts the Unit Owner/Debtor claimed, and the court found, that despite the proper lien filings, the Association only had security for $1,500 ($250 x 6 months).

Lesson.  Don’t wait to file and foreclose your liens.  Start the process in 90 days, including timely filing all liens, and then foreclose when it makes sense (normally immediately for a condominium and in year two for a homeowners association).  If you don’t, the bankruptcy courts are not going to protect you and your Association will lose even more, because it will be stuck with an owner who is not paying for even longer.