Introduction:
Many homeowners face the unfortunate reality of being unable to afford their home due to financial hardships. Filing for Chapter 13 bankruptcy to surrender a property can provide a path to relief, but homeowners often wonder: can the township still pursue me for property maintenance, such as mowing the lawn or addressing code violations? Understanding the interplay between bankruptcy, property surrender, and municipal enforcement is critical.
Why Municipalities Pursue Homeowners
Even if you have filed for bankruptcy, municipalities have the right to enforce local ordinances. Common violations include:
Overgrown grass or unkempt yards
Trash accumulation
Structural issues or unsafe buildings
Unpaid property taxes
Municipal enforcement falls under police powers, which are generally not stayed by bankruptcy. This means that filing for bankruptcy does not automatically prevent the township from issuing fines or taking enforcement action for municipal code violations.
Bankruptcy and Property Surrender
When a Chapter 13 debtor decides to surrender property:
The surrender must be outlined in the bankruptcy plan.
The creditor must accept the surrender. Simply stating you are surrendering the property does not automatically transfer ownership.
The plan confirmation alone does not absolve you of post-petition municipal obligations.
This was highlighted in the recent case In re Victor Achinivu, 17-30949 (D.N.J.), where the debtor attempted to stop the City of Trenton from enforcing property ordinances even after surrendering his properties in a Chapter 13 plan.
Case Summary: In re Victor Achinivu
The debtor filed Chapter 13 but fell behind on property taxes, leading to tax sales. No bidders came forward, and the properties reverted to the City of Trenton.
After stay relief was granted, the debtor filed a modified plan to surrender the properties.
Immediately after plan confirmation, the debtor sought an injunction to prevent municipal enforcement of property codes.
Court’s Decision:
The debtor did not meet the legal standard for a preliminary or permanent injunction.
Surrender in a Chapter 13 plan does not automatically transfer property; the grantee (in this case, the City) must accept it.
Section 362(b)(4) of the Bankruptcy Code allows governmental units to exercise police powers even during bankruptcy.
Therefore, the court denied the debtor’s motion, confirming that municipalities can enforce local ordinances regardless of a bankruptcy plan surrender.
Implications for Homeowners
Bankruptcy does not protect you from municipal enforcement. Even if you surrender your home, you may still be liable for fines, code violations, or maintenance responsibilities until the property legally transfers.
Communicate with the township. Some municipalities may provide temporary relief or payment arrangements, especially if you’re actively surrendering the property.
Seek legal counsel. Bankruptcy attorneys can help clarify your responsibilities and negotiate with municipalities to avoid escalating fines.
Other Relevant Legal Considerations
Chapter 7 vs Chapter 13: In Chapter 7, surrendering property may be simpler, as the trustee can take over and liquidate assets. In Chapter 13, surrendering property is part of the repayment plan, making it more complex.
Automatic Stay Limitations: Section 362(b)(4) explicitly exempts governmental action under police or regulatory powers from the automatic stay. Municipalities can continue to enforce local codes despite bankruptcy.
Tax Liens: Even after surrender, unpaid property taxes may continue to accrue until the property is officially transferred.Conclusion
Filing for bankruptcy and surrendering a home can help you get a fresh start, but it does not automatically absolve you from municipal obligations. As illustrated by In re Victor Achinivu, the township can still enforce property codes, and debtors cannot unilaterally stop this enforcement through a bankruptcy filing. Homeowners should stay informed, consult a bankruptcy attorney, and coordinate with local authorities to avoid additional fines or legal complications.
Thus, the court denied the debtor’s motion.
Steven N. Taieb, Esquire has been a south jersey bankruptcy
attorney for 35 years and is board certified in consumer
bankruptcy law by the American Board of Certification
which is accredited by the American Bar Association.
