The dischargeability of HOA dues in a chapter 7 case requires a somewhat convulated explanation. First a pair of important distinctions. There is a distinction between (a) HOA dues that accrue before the chapter 7 case is filed and (b) HOA dues that accrue after the chapter 7 petition is filed (including any assessments that first become due while a chapter 7 case is pending). There is a further distinction between (a) in personam liability (personal liability) and (b) in rem liability which relates to the HOA's lien rights against the property. A chapter 7 discharge eliminates a debtors personal liability for HOA dues that accrued before the filing of the bankruptcy case. However, a debtor remains liable for HOA dues that are first assessed after the filing of the bankruptcy case (see 11 U.S.C. section 523(a)(16)). In Florida, so long as the property is titled in the debtor's name, the debtor is personally liable for post petition HOA dues. As a general rule of thumb, a chapter 7 discharge does not invalidate an HOA lien filed against the property before the filing of the bankruptcy case. However, a chapter 7 debtor may move to strip an HOA lien off real property if the value of the property is less than the amount due on any liens that have priority over the HOA lien (i.e. first and second mortgages). Post- discharge, an HOA can sue the debtor in rem to foreclose on the property on account of the pre-petition lien if it is not stripped in the bankruptcy case. However, any judgment entered in that case, does not create personal liability on part of the debtor. In some cases, the HOA will file suit to foreclose the pre-petition lien and seek an in personam judgment against the debtor. In these cases, the amount of the personal judgment should be limited to post- petition assessments only.
If a debtor wants to avoid the foreclosure of the pre-petition HOA lien and he cannot strip the lien in his chapter 7 case, he will have to pay off the pre-petition debt (either in full or through a settlement with the HOA) even though that debt has been discharged.