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HOA FEES & BANKRUPTCY 
© 2016 by bankruptcyelcajon.com Attorney David A. Casey
Home Owner Association Fees & Bankruptcy Questions CALL (619) 447-6780 Find out if you are still responsible for HOA fees after you surrendered the property.  Learn when your obligation to the HOA ends. Find out what happens if you don't pay the HOA fees.  It is important that you retain a bankruptcy attorney who understands the bankruptcy code for HOAs..    Bankruptcy FAQ’s Regarding HOA fees:  This is a "Must Read" Article On HOA Fees Question:  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. Answer:  This is a very common question and the bankruptcy code that applies is  strange.  First, the money you owe the HOA should be listed as a creditor. Hopefully, you disclose this information to your bankruptcy attorney. Under the law a person surrendering a home, condominium,  townhome, any real property having HOA fees, can discharge whatever HOA fees that are owed prior to filing bankruptcy.  In other words, if you file bankruptcy, the amount owed for such fees at that time are discharged if the court grants you a Chapter 7 discharge of your debts.  How Bankruptcy Affects Past Due HOA Fees.? Answer Under the same Bankruptcy Code 523(a)(16), you are still responsible for the HOA fees until the foreclosure takes place. The Code implies that until you no longer have legal, equitable or possessor ownership in the unit, you owe the fees. This can be fees on a home, condo or some other unit that has Home Owner Associations fees.  This applies even if you have moved out and are no longer living at the residence.  Thus, any HOA fees or costs including late fees you are still responsible for.      Now let’s say the unit was foreclosed on and you still live in the unit. Since you are still living there you still would be responsible for the HOA fees. All the following must be met: 1.      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. 2.      All HOA debt incurred after filing that you do not pay, you are still responsible for until: a.      The Trustee of the bankruptcy court no longer has any interest in it. b.      Your lender forecloses on the property (or you sell it)  c.      You are no longer in the unit. d.      You no longer have the benefit of living in the unit. e.      The lender has taken legal possession of the unit. (In other words, your name is no longer on the title) . Now some 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 adversary proceedings. One 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.   In other words, the debtor will still be responsible for the debt.  To avoid any confusion,  my office provides the debtor with HOA information 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. I get calls from debtors who have utilized the services of some other attorney only to discover at the end of their bankruptcy, that they were not informed of the HOA laws and that still were 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.   It 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 leases.   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