One of the most misunderstood areas of bankruptcy law is how it applies to HOA fees once a bankruptcy case been filed. At least once a week our office receives a call from someone being sued for HOA fees that they thought were discharged in a previous bankruptcy case.
IF YOU ARE KEEPING YOUR HOME AFTER FILING FOR BANKRUPTCY:
If you are going to keep your house after bankruptcy then you should continue paying all of your HOA dues including any amounts you were behind on when you filed for bankruptcy. While the bankruptcy will discharge your personal liability for any HOA dues owed prior to your filing date, the HOA will still have a lien on your home. If you fail to pay these arrears the HOA can start foreclosure proceedings.
IF YOU ARE SURRENDERING YOUR HOME IN YOUR BANKRUPTCY
If you are surrendering your home in your Chapter 7 bankruptcy, your discharge will eliminate your personal liability for any unpaid HOA fees that have come due as of your filing date. However it will not wipe out any dues that accrue after you file your case. This means that you are on the hook for any HOA fees that come due after your filing date until your house is sold at a foreclosure sale and you are no longer the legal owner of the property.
Unless the outstanding HOA dues are paid off through the foreclosure sale (which many times they are not), the HOA can come after you to collect any unpaid dues that have accrued after you filed for Chapter 7 bankruptcy (even if you have already surrendered the house). Unfortunately, many homeowners find this out by way of a lawsuit filed long after they have moved out of the property.
I always make sure my clients know they are responsible for all HOA dues and assessments that become due after filing the bankruptcy case – even when those clients are walking away from the home.
Some state like Florida have a statute that caps the number of month an HOA can collect fees after a bankruptcy case has been filed however Georgia does not have any such law on the books. Since it may take some time for a lender to foreclose on a property, you need to be prepared to keep making the HOA dues on the property after bankruptcy even if you are letting the property go. Of course for many clients this is not a problem since they have already stopped making their mortgage payments and foreclosure will be coming soon. In the mean time they can remain in the property until the property actually forecloses.
If you are contemplating filing for bankruptcy and have an HOA with a property that you are planning on surrendering please contact our office to review what options are available.