Homeowner Association (HOA) fees or dues are monetary assessments collected by the Homeowner Association for maintenance, upkeep and general safety and security of a particular subdivision or development. They are typical in larger, upscale developments and with condominiums. Debtor’s that are filing for bankruptcy protection need to be aware of the treatment of HOA fees as their treatment differs from most other types of contracts.
If a debtor is filing for bankruptcy and plans to surrender his or her home, one question the attorney should ask is whether or not the debtor has HOA fees. If so, the client should be aware that any post-petition HOA fees are not discharged in the bankruptcy. For example, if a debtor surrenders their home in their bankruptcy (especially in Chapter 7), the debtor almost assuredly believes his or her obligation to the debt associated with their home will be discharged in their bankruptcy. However, if the mortgage company does not foreclose on the home until after the HOA fees come due, those fees are still the responsibility of the debtor. The section of the Bankruptcy Code that deals with this is 11 U.S.C. §523(a)(16), which discusses exceptions to discharge in bankruptcy. The exact wording of this section states,
“for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.”
It is not uncommon for a mortgage company or servicer to not foreclose on a home for a year or more after the home is surrendered in the bankruptcy. In that instance the owner or person who filed bankruptcy and surrendered the home is still responsible for the Homeowners Association Fees.
If you are having troubles making your house payments contact any of our offices for a free consultation of how we can help you.