You are still responsible for all debt you have incurred involving
the HOA fees until the date of filing bankruptcy. If the court grants the
discharge, then the fees are dismissed.
All HOA debt incurred
filing that you do not pay, you are still responsible for until:
The Trustee of the bankruptcy court no longer has any interest in it.
Your lender forecloses on the property (or you sell it):
You are no longer in the unit.
You no longer have the benefit of living in the unit.
The lender has taken legal possession of the unit. (In other words,
your name is no longer on the title).
creditor advisors and attorneys may tell their client to sign the “title”
back over to the lender. This is NOT a good idea since it may cause other
question I have been frequently asked, if a debtor or a person who has an
interest in real property in this situation was not informed of this before
filing, would this error make the attorney or advisor liable for the HOA
debt? First, all bankruptcy attorneys should inform their client about
HOA fees if they have interests in real property and that they will be
responsible for the fees until the property/unit/home is foreclosed on or
signed over to the lender. It is considered to be malpractice not to
inform the client unless the client did not disclose that they owned real
property, but the since the law is clear about the person being responsible
for the HOA fees the attorney is NOT responsible for the HOA debt. Since
the attorney’s action was not the cause of the debt of the HOA fees, I can
not see the debtor being awarded any of the HOA fees. In other words, the
debtor will still be responsible for the debt. The only thing the attorney
might be responsible for could be late fees and costs.
any confusion, my office provides the debtor with a HOA statement regarding
the debt so they are fully aware of bankruptcy laws and how the HOA fees are
handled. I believe that attorneys practicing in the field of consumer
bankruptcy should advise their clients who will be surrendering their home
or other real property that have HOA fees associated with the property.
get calls all the time from debtors who have utilized the services of some
other attorney only to discover at the end of their bankruptcy, that they
were still personally liable for HOA fees. This is why I believe it is very
important to discuss these issues with my clients who have any interest in
real property. Many times the debtor has moved out and believes that they
are no longer responsible to the HOA for the fees that they owe. For all
intents and purposes, they made their intentions clear in the bankruptcy
proceeding that they were going to surrendering their property back to the
bank/lender. They only learned later on that they were still liable for the
fees as the result of a change under the new bankruptcy code of 2005 [see 11
USC 523(a)16]. However, the new code section really has very
little effect due to the nature of the priority of the underlying HOA lien.
The code section clearly states: The 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 important part is that
“for as long as the debtor or the
trustee has a legal, equitable, or possessory ownership interest” this is
what makes the debtor obligated to pay this debt.
does not matter that the bankruptcy has been filed and the debtor has moved
out of the unit since the obligation (liability) continues until the
property is foreclosed upon or sold. Please also remember even after
foreclosure, if one still resides in the property prior to eviction, the
possessory interest would continue such liability. Bankruptcy code 523(a)16
at this time is not in conflict with 11 USC 365(p) regarding the assumption
of leases. Why? Since HOA fees arise from executory contracts and not
Question: Is there any way not to pay the debt to the HOA
post filing bankruptcy?
There are some options that are available:
A. Probably the easiest solution is to do
little if anything. Most of the time any past due fees are satisfied in
escrow from the eventual foreclosure or sale since the HOA has a
priority over the foreclosing party’s lien and they should get paid out of
the sale or foreclosure.
But this does
not always happen for some reason. If you do not pay the HOA fees, you
should put enough money aside to pay the fees and late fees until the exact
amount is determined, if any. This way if the claim is satisfied by the HOA
you might not be out any costs post filing and if you are, the amount is not
that much greater than if you had paid the fees, except for the late fees
Another possible solution is
to execute a deed in lieu of foreclosure or a short sale after the filing
date. The problem here this is never really recommended by bankruptcy
attorneys in California since it can cause an adversary proceeding.
You can continue to pay
post-petition HOA payments as they become due until the property is
Since you reside in
California, you may make the argument that under CCP 726(a) which requires
pursuit of the property prior to bringing any action against the person
(debtor) personally. The problem here is that most HOA liens will not
qualify as a ”mortgage” and does not fall within the statutory protection of
this California code.
believe taking the safe approach is always better. Clients should save
their HOA fees and don’t spend the fees post petition filing and to hold the
amounts pending the results of the eventual transfer. This way, if it ever
becomes a legal issue, clients would have the funds to satisfy the
obligation. Most of the time, this is NOT an issue but this gives them a
start on a savings account. In the worse case scenario, they have to pay the
fee and some late charges and interest.
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El Cajon Attorney
David A. Casey
(619) 447-6780 Chapter 13 & Chapter 7
Bankruptcy, Do I Still Owe HOA Fees After Bankruptcy
El Cajon 92019, El Cajon 92020, El Cajon
92021, El Cajon 92022, El Cajon 92090
Do I still owe HOA
fees after filing bankruptcy even though I surrendered my residence? I moved
out of my home after I filed bankruptcy but before the discharge