Legal Question in Bankruptcy in Texas

Foreclosure Priority In bankruptcy Between Two Secured Creditors.

Someone borrowed $42,000 from me in installments, secured against his condo which is valued only $28000. The money was borrowed for medical treatment between 1996 to 1999. We signed an agreement but no lien was filed because the first mortgage agreement did not allow it. Lien was filed on 10/4/2001 after the first mortgage was paid off in order to preserve my priority over other secured creditors. I have cancelled checks as evidence.

This person was sued by his Homeowners Association (HOA) in 1998. In 2/2001, he filed for chapter 13 which he may convert to chapter 7. The bankruptcy court has allowed HOA's claim of $35000 attorney fee as secured claim. An attorney told me that HOA can foreclose his condo and give me the money. Even though HOA will not get any money, but it will succeed in owning the condo which is its primary purpose. My Questions are

Who will be given first opportunity to foreclose? I or HOA?

Can HOA do as the other attorney told me?


Asked on 1/22/02, 2:38 am

1 Answer from Attorneys
Lawrence Maun Lawrence J. Maun, P.C.

Re: Foreclosure Priority In bankruptcy Between Two Secured Creditors.

If yo have a valid lien, it still may be junior to the HOA lien. The declarations in the deed restrictions sometimes give priority to the HOA lien. Even if you are junior to the HOA lien, any excess recieved by the HOA at a foreclsoure sale would be paid to you, again assuming your lin is valid. Attorneys fees to the attorneys representing the HOA of $35,000 seem very high. You have a complex situation and this short email does not begin to address all of the issues. You probably should retain an attorney to at least look at the papaer work to deterimine whether you have a securtiy interest and if so what you priority is. Larry Maun 71-.266.2560

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Answered on 1/22/02, 6:25 pm


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