HOA Fees After Bankruptcy

With HOA lawsuits on the rise, I frequently get a call from a new client asking, do I have to pay HOA fees after bankruptcy?  What you need to know is that all homeowner association (HOA) fees that were due up until the date that you file your case is wiped out.  However, you continue to remain liable for HOA dues as long as you remain on title to the property or in possession of the property.

Do I Have to Pay HOA Fees After Bankruptcy?

It used to be that if you gave up your property (said you no longer wanted it) when you file bankruptcy, then you no longer were liable for HOA fees after bankruptcy.  This all changed in 2005 with the enactment of amendments the Bankruptcy Code.  Because prior to the amendments the law was different, many people still mistakenly believe that if you file bankruptcy and give up your home you are no longer liable for HOA assessments.  This is not at all the case.


With the enactment of the 2005 amendments, another exception to discharge of debts was added to the bankruptcy laws providing that as a homeowner you are liable for all HOA dues incurred after the date you file bankruptcy so long as you maintain a "legal, equitable, or possessory ownership interest" in your property.  In almost all cases, you will retain at least legal title to your property (meaning you will remain on title until a foreclosure or other type of sale occurs), and legal title is a legal ownership interest.


I have encountered legal treatises and articles on the internet that, citing to old case law decisions, mistakenly state that as a homeowner you are only liable for HOA dues after bankruptcy if you reside at your property or rent it out.  These treatises and articles are wrong.  The controlling statute is crystal clear that as long as you maintain a "legal, equitable, or possessory ownership interest" in your property, you are responsible.


Therefore, when it comes to HOA fees and bankruptcy, the current law could not be more explicit.  The new law makes a clear and unequivocal statement that as long as you remain on title you remain responsible for HOA assessments after bankruptcy. 


HOAs and HOA attorneys familiar with the new law are increasingly suing homeowners for past due HOA fees after bankruptcy, especially since many homeowners are walking away from homes and not paying HOA regular or special assessments and the HOAs are suffering financially.  Your goal in filing for bankruptcy is to get out of debt, so it is important that after you file you are not sued for HOA dues.


So what can you do to protect yourself?  If you want to keep your home when you file bankruptcy, pay the HOA fees accruing after your filing date.  If you want to give up your property, the best thing you can do is to let your property go to foreclosure as soon as possible because until the foreclosure sale date you will remain liable for the HOA dues. 


Trying to short sale your property may prolong the foreclosure sale and cause to be liable for HOA assessments accruing after bankruptcy. 


Another good option would be to deed the property back to the bank (if they will accept the transfer), thus taking yourself off title and ending your liability for HOA dues.

2 thoughts on “HOA Fees After Bankruptcy

  1. OK,  so here is my question: I have been delinquent with my HOA fees.  I am waiting to find out any day now if my loan modification is approved (no more equity left in my condo by the way).  I intend to file bankrupcy especially because of an equity loan (what equity, there is no more), and some other credit cards.  Can I include what I owe to the HOA in my bankrupcy chapter 7? I really have no other assets other than my car that i am still making payments on, my Calpers retirement, and that's it. I am 59 and still working full time, and hopefully until 66, and if possible even longer. From reading this article I understand that maybe I can and that I will just have to keep paying the current HOA fees.  But what if my loan modification is approved and I therefore stay here.  What happens then?  Do I just continue to pay the crrent HOA fees.  I consulted an attorney but I am not so sure of what he is saying.  I am also trying to settle with the IRS, but I am keeping that problem separate.  Please help.

  2. Dear Linda, when you file bankruptcy in San Diego, you can include (in your bankruptcy) all of your HOA fees accrued up to the point that you file bankruptcy. All HOA fees incurred thereafter are your responsibility as long as you are on title to your property or maintain control over the property. Mark

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