An HOA used small-business bankruptcy to reorganise around a homeowner's judgment
An HOA used small-business bankruptcy to reorganise around a homeowner's judgment
2026-09-10 · Georgia · Courts
What happened. A homeowner won a fee award against her association in state court. Before she could collect, the association filed for subchapter V bankruptcy — the small-business fast track — and reorganised. The Eleventh Circuit, whose published decisions bind Georgia, largely upheld the result.
In re Ellingsworth Residential Community Ass'n, Inc.; Guan v. Ellingsworth Residential Community Association, Inc., Nos. 21-12969, 21-12971, 21-13231, decided 13 January 2025. Tjoflat, J., with Branch and Luck, JJ. Published; affirmed in part, vacated and remanded in part.1
How it started
Alice Guan failed to conform her yard to the covenants. Her association sued her in state court — instead of arbitrating, as its governing documents provided.
That was the mistake that decided everything downstream. The state court awarded Guan costs and fees on the basis that the association had waived its claims by suing rather than arbitrating.
Before she could collect, or press her counterclaims, Ellingsworth filed for subchapter V relief in the Middle District of Florida.
What the Eleventh Circuit decided
It affirmed the district court's orders upholding:
- Ellingsworth's subchapter V designation — that is, that a community association can qualify as a small-business debtor on that track;
- confirmation of its reorganisation plan; and
- denial of Guan's motion for relief from the automatic stay.
It vacated one thing only: the dismissal of Guan's appeal from the bankruptcy court's refusal to abstain. Applying Ritzen Group v. Jackson Masonry, the court held that denial was a final, immediately appealable order — “there is nothing left for the Bankruptcy Court to do in that ‘proceeding’ and the order is final.”
It was careful about scope: “We emphasize the limited nature of our decision. We take no position on the merits of Guan's abstention appeal.”
Why Georgia readers should care
The case arose in Florida. It is binding precedent in Georgia because the Eleventh Circuit covers Georgia, Florida and Alabama, and the opinion is published.
What it establishes for Georgia is not a point of bankruptcy procedure. It is that a community association is a business that can reorganise — including against a homeowner-creditor holding a judgment it does not want to pay.
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