Bankruptcy and Homeowners Association Dues (HOAs) or Condo Dues
March 2, 2012
Are homeowners association dues or condo dues dischargeable in bankruptcy? Yes but there are nuances to this answer. If you file chapter 7 bankruptcy to surrender a property you are discharged from your liability under these dues that were incurred prior to filing the chapter 7 bankruptcy. However, you could still liable for any dues or assessments that come due after the bankruptcy filing date.
So how do you get a fresh start from your debt if you are still liable for these dues and fees after surrendering a home or condo in bankruptcy? Generally, these fees and dues are cleared up once the property is taken out of your name. This can be achieved by signing a deed in lieu of foreclosure or when the bank actually forecloses on the property. There is a state statute that holds the property owner liable for taxes, condo or HOA dues or nuisance liens that are assessed on a piece of property. You are still the property owner as long as your name is on the deed. The only way your name can be taken off the deed is to have someone else put their name in its place. Again, this can be done either by the bank foreclosing or signing a deed in lieu of foreclosure. The bankruptcy only discharges the dues and fees that are accrued prior to filing the bankruptcy, it does not take your name off the deed.
Because banks are reluctant to accept a deed in lieu of foreclosure if you are still liable on the debt I advise my clients to file chapter 7 bankruptcy to discharge their liability under the debt and then keep the property maintained and the dues and fees paid after filing if they are still living in the property until the foreclosure sale. During this time you can live for free and not pay the mortgage but you need to pay the HOAs and cut the grass.
For the client that has already moved or wants to move out of the property, I advise calling the bank after filing the bankruptcy and asking for a deed in lieu of foreclosure. The banks are more responsive once the bankruptcy has been filed because they can’t hold you liable for the debt anymore and the deed in lieu is less expense than your lender hiring a foreclosure attorney. If this doesn’t work, these types of debt will be cleaned up once the house is sold in foreclosure. The main problem today is it’s taking longer and longer for banks to actually foreclose.
If you are simply behind on your dues and you want to keep your property, filing chapter 13 bankruptcy will allow you to catch up on your due and save your property. If you want to talk further about getting out of debt or your specific case, e-mail me at [email protected]
or call me at 904-981-8100.