If you don’t make your homeowners association (HOA) payments, the HOA can place a lien on your home and come after you personally to collect the debt. If you are behind on your HOA dues, whether you can wipe out your obligations in Chapter 7 bankruptcy depends on:
- the timing of your bankruptcy
- whether you want to keep the property, and
- whether the HOA or your mortgage company has already foreclosed on the property.
For more information on how your debts are treated in Chapter 7 bankruptcy, see our topic area on Your Debts in Chapter 7 Bankruptcy.
Continue to Pay Your HOA Dues If You Want to Keep Your Property
Filing for Chapter 7 bankruptcy can discharge (wipe out) your personal liability for past due HOA fees. But the HOA’s lien on your property will typically survive your discharge. This means that even if the HOA can’t sue you personally for any fees that were discharged in your Chapter 7, it may be able to foreclose on your home to collect that debt.
If you want to keep your property, continue to pay your HOA dues as they come due and try to catch up on any payments you have missed.
To learn more about how to keep your home in Chapter 7 bankruptcy, see our topic area on Your Home in Chapter 7 Bankruptcy.
Chapter 7 Bankruptcy Doesn’t Discharge Post-Petition HOA Dues
If you are thinking about surrendering (giving back) your home, keep in mind that a Chapter 7 discharge will not wipe out your obligation to pay any post-filing (also called post-petition) HOA dues that come due after your filing date. Filing for Chapter 7 bankruptcy only discharges your liability for outstanding pre-petition HOA dues that exist at the time you file your case.
This means that if you surrender your property in Chapter 7 bankruptcy, you will remain responsible for all HOA dues that accrue from your filing date until the foreclosure sale takes place and you don’t legally own the property anymore. If the foreclosure sale doesn’t pay off your debt to the HOA, the HOA can sue you to collect your post-petition arrears.
Example. Jerry filed for Chapter 7 bankruptcy on July 10 and indicated his desire to surrender his house on his Statement of Intention. He moved out of the house a few days later. After receiving permission from the bankruptcy court, his mortgage lender started the foreclosure process on his house. But the foreclosure sale did not occur until several months later on November 15. Because Jerry’s bankruptcy discharge only wipes out his pre-petition debts, he is responsible for any HOA dues that come due between July 10 and November 15 (assuming the HOA dues were not satisfied from the foreclosure sale proceeds).
Avoiding Liability for Post-Petition HOA Dues
The following are some of the most common ways you may be able to avoid being liable for post-petition HOA dues after filing for Chapter 7 bankruptcy:
- Sell your house or transfer ownership to your lender (for example through a deed in lieu of foreclosure) before filing for bankruptcy.
- Negotiate a settlement with your HOA that eliminates your responsibility for fees that come due after you move out of the property.
- Delay your bankruptcy until after the foreclosure sale takes place.