Debtors Still Owe HOA Fees After Bankruptcy?Filing bankruptcy while owning a condominium, townhome or single family home that has homeowners association fees attached to it might not completely get rid of the HOA liability.

Facts about how HOA fees may be handled during bankruptcy:

  1. Homeowners’ associations have a legal right to place a lien against a debtor’s property if they fail to pay their HOA fees.  They can also file foreclosure on the property to recoup the fees they are owed.
  2. If a debtor files bankruptcy while living in a property that has HOA fees may be able to discharge the HOA fees that accrued before the bankruptcy filing.  However, all HOA fees incurred after the bankruptcy and until the foreclosure or surrender of the property may not be discharged in bankruptcy.  As long as the debtor has legal possession of the property they are responsible for the HOA fees.
  3. Because of the liability for HOA fees accrued before a foreclosure or surrender of the property, many debtors choose to wait until the foreclosure is imminent before filing bankruptcy.  By waiting until right before the property goes into foreclosure, the homeowner minimizes their liability for HOA fees after bankruptcy.

So how should a debtor handle their bankruptcy if they own a property with HOA fees? Many bankruptcy attorneys suggest that the debtor hold their HOA payments in trust pending the outcome of their bankruptcy case.  That way if they do in fact owe HOA payments after their bankruptcy discharge, they can easily make the payment and thus avoid starting their post-bankruptcy life with a new load of debt on property they no longer own.