Adam Mack, J.D.
Is it true I still have to pay the HOA fees for a house I no longer live in – even after I’ve filed bankruptcy?
I’ve helped many people over the years who struggled with losing their homes, usually due to circumstances beyond their control. Most were able to save their home through bankruptcy. Some people, however, choose to not keep their house for financial or personal reasons. Whether you plan to keep or surrender a house, any time a homeowners association (or “HOA”) is involved, there’s an added level of complexity and liability to the situation.
Bankruptcy with Foreclosure
Like other unsecured debts, past HOA fees are dischargeable in both Chapter 7 and Chapter 13. Whether or not you choose to keep the house, you will continue to be liable for the current HOA fees throughout the proceedings. If you choose to not keep the house, you will be responsible for the ongoing HOA fees until the foreclosure process is complete and the bank has taken possession of the property.
Bankruptcy without Foreclosure
If the bank has not already initiated foreclosure proceedings, however, there’s a potential for you to be stuck paying the homeowners association fees indefinitely. As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Congress declared that debtors in bankruptcy were responsible for the HOA fees so long as they had “a legal, equitable, or possessory ownership interest”[1] in the property. Essentially, that means that until someone else purchases and takes possession of the house, the debtor is responsible for the HOA fees. At the time the law was changed, we were at the height of the housing bubble and it was unthinkable that a bank would not immediately take possession of and resell a house. Nowadays banks are reluctant to take possession of properties that are in default, and we’ve increasingly seen HOA’s trying to come after people who have not lived at the home for months or even years for thousands of dollars in past-due HOA fees. A good attorney can help you protect yourself against that kind of future problem.
The Most Important Part
It’s complex enough dealing with real estate, and an HOA can quickly turn a tough situation into a nightmare. Like most creditors in a bankruptcy, your HOA probably has an attorney to make its case. You deserve a good attorney to ensure that your legal rights are protected, too.
[1] 11 USC § 523 (a)(16)
Disclaimer
These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!
