Written by attorney Elissa Westbrook-Smith

HOA Fees in your Pennsylvania Bankruptcy Case

Debtors are often surprised to learn that they can be held personally liable to pay their homeowner’s association (HOA)fees after filing for bankruptcy protection. This is true even if the debtor has moved out of the home and intends to surrender the home back to the mortgage lender in the bankruptcy case!

Pursuant to 11 USC 523(a)(16), debts are excepted from discharge if they are

“for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case . . . .

The language that triggers the liability is the portion that includes “legal, equitable, or possessory ownership interest" by the debter. When the debtor files a bankruptcy and moves out of his home, his ownership interests are no eliminated until the home is sold or foreclosed upon.

If you owe past due HOA fees and you are considering filing a bankruptcy case, you should discuss it with your attorney. In most cases, the liability for the HOA fees will be satisfied out of the eventual foreclosure or sale since it has priority over the foreclosing party’s lien. You may also decide to pay your HOA fees until the property has sold or been foreclosed. However, it may be wise for a debtor to save his HOA fees that come due after the bankruptcy filing in trust pending the outcome of the pending transfer. This way, if it becomes an issue, the debtor has the funds available to satisfy the liability. Most likely it will not become an issue and the debtor has a little savings account set aside.

Additional resources provided by the author

If you are considering filing for bankruptcy protection, or you are a secured creditor dealing with a bankrupt borrower, call McDowell Riga Posternock PC at 856-528-3389 . Our attorneys diligently pursue the firm’s goal of providing our clients with superior legal services. Our combined law practice experience of over 80 years allows us to offer the same first-rate service that you may expect from a big law firm, only we work hard to make sure we are more accessible and reasonably priced. Our collective experience of allows us to handle legal problem in many areas ranging from Bankruptcy for both consumers and businesses, to Family Law, Consumer Fraud and much more out of our offices in New Jersey and Pennsylvania. Our New Jersey offices are located in Moorestown, Maple Shade, and Willingboro. Our Pennsylvania offices are located in Bryn Mawr and Philadelphia.

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