Payment Plans and Owner Bankruptcies: How a Florida Association Protects Its Lien While Working With a Delinquent Owner

Jason Hamilton Mikes, JD, MBA
Founder & Managing Shareholder

• Published September 23, 2026
• Reviewed by Jason Hamilton Mikes, JD, MBA, September 23, 2026
• Florida Statutes as of July 1, 2026
• Applies to: Condominiums · HOAs · Cooperatives

A Florida association may enter into a payment plan with a delinquent owner, and a well-drafted plan is often the association's best collection tool: it produces payment without the cost and delay of foreclosure, and it does so while the lien, the accrued fees, and the statutory notices remain in place. The plan must respect the statutory order of application in sections 718.116(3) and 720.3085(3), under which every payment goes first to interest, then late fees, then costs and attorney's fees, then to the oldest assessment. And it must be built to survive default, because some owners will stop paying. When an owner instead files bankruptcy, the rules change instantly: every collection step stops, the association becomes a creditor in federal court, and what it can recover depends on the chapter filed and the equity in the unit.

Why payment plans work

Foreclosure recovers the debt from the unit; a payment plan recovers it from the owner. For an owner with income but a temporary problem, a job loss, a medical event, a divorce, the plan converts a contested foreclosure into a stream of payments, and it keeps a neighbor in the community. For the association, a plan avoids the six-to-nine-month foreclosure timeline, the risk of taking title subject to a mortgage, and the possibility that a lender's foreclosure wipes out most of the debt under the safe-harbor cap. The tradeoff is time: the plan extends the collection period, and if the owner defaults the association has lost months. A plan that is short, monitored, and self-terminating manages that tradeoff.

Terms a plan must contain

1. Acknowledgment of the debt. The owner acknowledges the full balance, itemized by assessments, interest, late fees, costs, and attorney's fees, and acknowledges that the association's lien and notices remain in effect. This forecloses later disputes about the amount.
2. Current assessments stay current. Every regular and special assessment that comes due during the plan is paid in full and on time, in addition to the plan payment. A plan that lets the owner fall further behind while paying down the arrears is not a plan.
3. A definite schedule. Equal payments on stated dates over a stated period, typically six to twelve months, with the balance paid in full by a date certain. Longer plans should be reserved for large balances and require board approval.
4. Statutory application of payments. Payments are applied as the statute requires: interest, late fees, costs and fees, then assessments, oldest first. The plan should say so, and the ledger should show it. An owner's notation that a payment is "for assessments only" does not change the order.
5. Continued accrual. Interest continues to accrue on the unpaid balance at the rate the documents allow, and the association's reasonable fees for preparing and monitoring the plan are added, as the documents and the 30-day late-notice statute permit.
6. The lien stays. The claim of lien is not released until the plan is paid in full. If no lien has been recorded, the plan should state that the association may record one, after the required notice, without breaching the plan.
7. Automatic default. A missed or late payment, or a missed current assessment, terminates the plan without further notice, the full balance becomes immediately due, and the association may resume collection and foreclosure from where it left off. Because the statutory notices were given before the plan, the association does not restart the 30- and 45-day periods.
8. Suspensions. The plan states whether use rights (and, where lawfully suspended, voting rights) suspended for the delinquency are lifted during the plan (most associations lift them while the owner performs) and that they are reinstated on default.
9. No waiver. Acceptance of partial payments under the plan does not waive the association's right to the full balance or its remedies.
10. Signatures. Signed by the owner and by the association's authorized representative, kept as an official record with the account file.

Who approves a plan

The board may approve plans case by case, but the better practice is a written collection policy that authorizes the manager or counsel to offer plans within stated parameters, such as up to twelve months for balances under a stated amount, with a required down payment, and to refer anything outside those parameters to the board. Uniform parameters answer the selective-treatment complaint that follows any negotiated arrangement and keep individual accounts off the board's open-meeting agenda, where protected financial information should not be discussed in detail.

Communicating with the owner

The Florida Consumer Collection Practices Act applies to associations and managers collecting assessments. Communications about the debt must not harass, must not misrepresent the amount or legal status of the debt, must not disclose it to third parties, and must stop going directly to an owner known to be represented by counsel. Payment plan discussions are collection communications, and the tone and content of every letter and email should assume the owner's attorney will read it.

When the owner files bankruptcy

The filing of a bankruptcy petition imposes an automatic stay under 11 U.S.C. § 362 on every act to collect a pre-petition debt: demand letters, recording a lien, filing or continuing a foreclosure, suspending use rights for the pre-petition delinquency, demanding rent from a tenant, and even telephone calls. The stay takes effect the moment the petition is filed, whether or not the association has received notice, and violating it exposes the association to damages and sanctions. The first thing a manager does with a bankruptcy notice is forward it to counsel and stop all collection activity on the account.

The association then becomes a creditor. It files a proof of claim by the deadline the notice states, itemizing the pre-petition debt and identifying the lien. It reviews the debtor's schedules to confirm the unit is listed and the association is scheduled as a secured creditor. And it monitors the case for the events that matter: a motion to sell the unit, a plan that treats the association's claim, a trustee's abandonment of the unit, or a dismissal that ends the stay.

Chapter 7 versus Chapter 13

In a Chapter 7 liquidation, the trustee sells non-exempt assets and the debtor's pre-petition personal liability is discharged. The association's lien, however, survives the discharge as a charge against the unit unless the court specifically avoids it, so the association may foreclose the lien after the case closes or after obtaining relief from the stay, though it may not pursue the discharged owner personally for the pre-petition balance. And under 11 U.S.C. § 523(a)(16), assessments that come due after the petition are not discharged for as long as the debtor or the trustee holds a legal, equitable, or possessory interest in the unit. An owner who keeps the unit through a Chapter 7 remains personally liable for every post-petition assessment.

In a Chapter 13 reorganization, the debtor proposes a plan, typically three to five years, to pay creditors over time. The plan may cure the pre-petition arrears to the association in installments while the debtor keeps the unit, and post-petition assessments must be paid as they come due, usually directly to the association. The association should review the plan when it is filed, object if it mistreats the association's secured claim or proposes an unreasonable cure, and monitor performance. A debtor who falls behind on post-petition assessments has defaulted, and the association may move for relief from the stay to proceed against the unit.

Practical steps in every bankruptcy

• Stop all collection activity on the account the day notice is received; document the stop in the file.
• Forward the notice to counsel and calendar the proof-of-claim deadline.
• Reconcile the ledger to the petition date; the pre-petition balance is the claim, and post-petition assessments are tracked separately.
• Continue to bill post-petition assessments in the ordinary course, without reference to the pre-petition debt, unless counsel advises otherwise.
• Monitor for sale motions, plan confirmation, dismissal, and discharge, and act on each with counsel.
• Do not release the lien on discharge; it survives.

Contact Hamilton Mikes

Hamilton Mikes prepares payment plans and collection policies and represents associations as creditors in owner bankruptcies throughout Southwest Florida. Call 239-594-7227 or visit our Assessment Collection page.