Will Filing a Bankruptcy Discharge Homeowner Association Fees?

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “I own a condo and owe approximately $13,000 in maintenance fees, will this debt be discharged by filing bankruptcy?”

The simple answer to the question the blogger has raised is yes, it is possible.

Unfortunately, with most bankruptcy laws, there can be complicated answers to even the simplest questions. Talk to a bankruptcy lawyer for more information.

Chapter 7 Bankruptcy, called liquidating your assets, is the simplest type of bankruptcy. It is this type of bankruptcy that maintenance fees, or homeowner association (HOA) fees as they are sometimes called, might be completely discharged if you do not have enough assets to liquidate and pay the debt. Discharging a debt means the debt is forgiven, but with any kind of HOA fees , the debt may be forgiven only up to the end of the bankruptcy discharge.

All HOA fees that become due post bankruptcy discharge cannot be discharged. As a matter of fact, you will be responsible for paying all HOA fees post bankruptcy discharge for as long as your name is on the title to the property protected by the HOA.

To get a layman’s glimpse at the complications of bankruptcy law, here is the exact language used in the bankruptcy code concerning HOAs:

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 interestin 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.”

Simply put in layman’s terms, you will owe all HOA fees that occur after your bankruptcy has discharged your debts.

A warning to those readers who are in an HOA: A title of a home or property is not transferred until a legal foreclosure has taken place. You can technically surrender a property and still own it. Just because you are not occupying the property, you have given up the keys, or you have told your lender you no longer want it does not mean you do not own it any longer. Only a legal transfer of title releases you from ownership and having to pay the HOA fees.

If you live in or around the metropolitan area of Sacramento, California, contact us at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

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