If you're considering filing for bankruptcy, you're probably worried about which debts will be discharged in your case and which debts you'll still be responsible for after the case is over. Most debtors are usually worried about credit card debt, medical bills, and delinquent mortgage payments. Often times, you may not even think about your homeowners' association (HOA) dues because they seem so small compared to all of your other debts.
HOA dues are different than other types of debt in bankruptcy. What happens to your HOA dues depends on many factors including which type of bankruptcy you file and whether you intend to keep your home after bankruptcy.
Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy and owe money to a homeowners association, you may be able to discharge some or all of the outstanding debt. However, if you intend to keep your home or condominium, you will most likely need to continue to pay the dues in order to keep your property.
One of the papers you need to fill out when filing for bankruptcy is a Statement of Intention. In this form, you'll indicate whether you intend to retain or surrender your real property. If you find that you cannot afford to keep your home, you can surrender it in a Chapter 7 bankruptcy. When you surrender your home or condo, you may be able to discharge all of the debts associated with it, including the HOA fees. If you decide that you want to keep your home, you should continue paying all of your HOA dues including any amount you were behind on when you file for bankruptcy.
The HOA fees that can be discharged include those that have been accrued up until the date of your bankruptcy filing. Any additional fees that accrue after you file will not be discharged. This means that you're responsible for any HOA fees that accumulate after your filing date until your house is sold and you are no longer the legal owner of the property. So speak to your attorney about how to get rid of that property as quickly as possible. Remember, the attorney cannot take any action without your permission and consent as you could remain the legal owner of the home after the bankruptcy.
Chapter 13 Bankruptcy
If you owe money to an HOA and you file for Chapter 13 bankruptcy, there are certain things you should keep in mind. What happens to your HOA dues and whether you're required to pay them depends on several factors, including:
- Your intention to keep or surrender your home
- Whether the HOA dues were accrued before or after you filed the Chapter 13 petition
- The laws of your state and bankruptcy court
If you intend on keeping your home, the HOA dues accrued prior to filing for bankruptcy (pre-petition) must be paid in full in your Chapter 13 repayment plan. If you do not pay your HOA dues after filing your bankruptcy petition, those dues will attach to the home as a lien.
Bankruptcy laws vary on how to treat post-petition HOA dues if you decide to surrender your home. Some bankruptcy courts may allow you to discharge the post-petition HOA dues upon the completion of your repayment plan. However, this isn't always the case. In some cases, even if you decide to surrender your home, you may still be required to pay the ongoing HOA dues while the property is in your name. This is why you need to speak with your attorney on any steps that will need to be taken after your case is filed.
If you're thinking about filing for bankruptcy, the most important step you can take is to meet with an experienced bankruptcy attorney. Bankruptcy attorneys understand the laws surrounding bankruptcy and will be able to advise you as to whether your HOA dues will be discharged in bankruptcy.
