The Homeowners’ Association: some love them, some hate them, some put up with them as a necessary evil. Regardless of how or why you ended up in a community that charges homeowners’ association dues or fees, they aren’t something to dismiss out of hand. In fact, ignoring the payment of regularly due homeowners’ association fees can result in a quickly compiled, out of control mound of debt. And, don’t be fooled, the homeowners’ association is not a debt you can easily ignore. Homeowners’ association fees are actually frequently included in bankruptcy filings.
Quick FAQ About Homeowners’ Associations & Bankruptcy:
Do Homeowners’ Associations count as a “creditor” for purposes of bankruptcy? Yes, if you owe a debt to your homeowners’ association, they are a creditor that should be included in your full list of creditors in your bankruptcy petition.
Can past due Homeowners’ Association dues be discharged through Chapter 7 bankruptcy? Yes, many have successfully discharged their past due homeowners’ association fees through Chapter 7 bankruptcy. But HOAs are handled differently under bankruptcy code and the discharge of HOA fees depends upon the specifics in your situation.
If you are contacted after filing for bankruptcy about past due homeowners’ association fees, they may not have a right to collect. For instance, if the association foreclosed on your property prior to the filing of your bankruptcy case, they no longer have the right to collect. Doing so eliminates the resident’s obligation to pay an outstanding balance.
But remember that Homeowners’ Associations (or HOAs) receive special treatment under the bankruptcy code. This is because while some HOAs may abuse the authority they hold, most are acting appropriately and their members collectively cover the costs of maintaining the property. The fees or dues are based on the community’s necessary expenses. When one member fails to pay, the other members of the community are required to pay more in order to cover the necessary services and maintenance.
Here are a few HOA bankruptcy facts that may surprise you:
- If you keep your property, but file for bankruptcy, you are responsible for all HOA dues even if you are delinquent on the dues prior to filing for bankruptcy. In this scenario, you must pay both current and past due fees or the homeowners’ association can foreclose on the property. You cannot file for bankruptcy, wipe out HOA dues owed at the time of filing, and then start paying as if you are current. When filing bankruptcy, but keeping the property, past due HOA fees are not discharged.
- If you walk away from the property, but continue to live on the property after you file for bankruptcy, all the HOA dues owed at the time of the bankruptcy filing are discharged. Any dues that come due after the filing, but before the sale of the property (auction, etc.) are your responsibility. It’s a good idea to just consider post-filing HOA dues as a monthly rental payment. It avoids putting the HOA in a tough spot and avoids liability on your part when the property is eventually sold in foreclosure or traditional sale.
- If you move out of the property, but the property has not been sold, you are still responsible for the HOA dues. The pre-bankruptcy filing dues are still gone, but the post-filing dues are still your responsibility even if you have physically moved out of the property.
- If you walk away from the property, but file for bankruptcy after the property was sold (i.e. short sale, traditional real estate transaction, or foreclosure sale/auction), you eliminate all HOA liability. You do not incur any new liability because the property has been sold. Since you are no longer the owner, you are not responsible for future HOA dues.
To discuss the options available through Chapter 7 bankruptcy further, please get in touch with the southern California bankruptcy attorneys at Westgate Law.