What happens to Homeowner Association Fees Due After I File Bankruptcy?

Robert A. Stumpf

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Bankruptcy Attorney

Contributor Level 19

Posted about 2 years ago. 1 helpful vote

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What are your outstanding dues on the date of your bankruptcy case?

Bankruptcy acts to discharge (wipe out) the debts you have on the date of the petition. But all debts are not the same-- some are secured debts (debts that have a lien or claim against them...examples being a home with a mortgage, or a car with a lien on the title). These debts are not normally wiped out in a bankruptcy proceeding. The other main class of debts are unsecured debts, and these are discharged when bankruptcy is filed. So for example, your Visa card balance is likely to be wiped out in a bankruptcy; but a car lien probably would not. This extends to HOA does that were existing on the date of the filing of your bankruptcy case. If those fees have been applied as a lien on the property (subject to exceptions), they are NOT wiped out in the bankruptcy case, but still stay with the property, just like other secured debts. If the HOA dues merely were unsecured on the date of the filing, there would be no "personal" liability for you to pay them.

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What happens after the bankruptcy? Part I

Bankruptcy does more than simply wipes out your debt. It usually discharges future obligations of the contract itself. So, in the case of a credit card, your bankruptcy will wipe out the current balance, and wipe out any future obligation regarding this account at all. This rule does not apply to HOA fees, however Recently, the laws were changed to that NEW HOA fees (charged after the filing date) are still valid against you. Your obligation to pay them does not permanently end because you filed a bankruptcy case. So if you file bankruptcy, and receive a bill for HOA fees, you have to ask yourself a couple of questions. 1) When were these charges due? Again, if they were before the bankruptcy, you do not personally owe them. Even if you are no longer currently living in the property, as long as you are the legal owner you can be held liable. (Legal owner likely meaning your name is still on the deed/title to the property).

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What happens after the bankruptcy? Part II

2) If a lien has been filed against your property for HOA fees, the filing date of such lien is likely important. If it was filed after the date of your bankruptcy filing, the charges it refers to must be for after your filing date. If it was filed prior to your bankruptcy, those charges are likely representing a valid lien. What happens if you have a valid HOA bill or lien against you? If you (or your lawyer) determine it is valid, you of course have to pay it somehow. If you are surrendering the property, this could be a tricky situation, because your lender may delay taking title back to the property. If you don't surrender the property, you might have a valid HOA lien, but these are small amounts and usually don't lead to much trouble. It is possible for the HOA to sue to foreclose their lien (based on many factors) but success is usually not likely and it's often more of a collection tactic on their part. If you need to, discuss these issues with a professional.

Additional Resources

For the statute related to this topic, please see 11 U.S.C. ยง523(a)(16).

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