Homeowners Association Liability After Chapter 7 Bankruptcy

I have received emails and phone calls from many of my recent Chapter 7 bankruptcy clients about their personal liability for homeowner association (“HOA”) dues. These former bankruptcy debtors are being told by their HOA that they owe past-due dues or that they have HOA liens on their property.

The clients believe that the Chapter 7 bankruptcy discharged all their debts including their HOA liability. They assume that something went wrong with their bankruptcy because they are still being harassed by their HOA collectors and attorneys.

Typically, these bankruptcy debtors indicated on their bankruptcy petition that they intended to surrender their homestead. They stopped paying their mortgage, taxes, and HOA dues. They are either waiting for the bank to foreclose, or they have been sued for foreclosure and are fighting the foreclosure in court. They are living in their home for “free” , without making any payments, and intend to continue to do so until the bank forecloses and threatens to evict them.

Chapter 7 bankruptcy discharges all personal liability on your mortgage so that you are not personally liable for a deficiency if and when the bank forecloses. There is no personal liability to pay real estate taxes. There is personal liability to pay HOA dues and assessments. Your Chapter 7 bankruptcy discharges all your HOA liability that accrued up to the bankruptcy filing date. However, after you file bankruptcy you are personally liable for all HOA dues that accrue after the filing date and until you are no longer on the title to the property.

If you file bankruptcy and maintain title to the property thereafter you are personally liable for all HOA dues for months after the bankruptcy filing date. Unlike the case of future mortgage payments , the bankruptcy does not eliminate personal liability for future HOA dues. Bankruptcy debtors wanted to live in their homes after bankruptcy without paying the mortgage should consider keeping current their HOA debts. The only way to escape this liability is to deed the property to the mortgage lender in advance of foreclosure, or simply wait for foreclosure and hope the HOA does not sue you for the HOA dues.

Additionally, some Chapter 7 clients have called wanting to know why there is an HOA lien on their property after they had filed Chapter 7 bankruptcy. The debtors think that because the bankruptcy discharges pre-petition HOA debt that the HOA has no right to put a lien on their home.

If a HOA records a lien for dues owed pre-bankruptcy the lien attaches to the debtor’s property even though the bankruptcy discharges the underlying debt. It works like an IRS lien; once the lien is on the property it sticks to the property regardless of what bankruptcy does to the debt. Liens attaching before the debtor files bankruptcy remain enforceable against the property.