- August 15, 2023
- Thomas Adam
Many people likely do not realize that past due homeowners association fees can be discharged through declaring bankruptcy. In these cases, homeowners associations (HOAs) must follow legal requirements to record a Notice of Assessment lien. This amount listed on the lien then becomes secured debts against the homeowner’s property in bankruptcy, and, in addition to the HOA fees, any additional notice of assessment lien recorded (for such additional amounts as attorney’s fees, costs, etc.) can also be eliminated in Chapter 7 or Chapter 13 bankruptcy because these unpaid dues are a type of secured debt. However, it is important to note that this does not apply to any additional fees that accrue after filing for bankruptcy.
Below, we discuss your options for discharging these debts through both Chapter 7 and Chapter 13 bankruptcy:
Chapter 7 Bankruptcy
If you surrender your home during bankruptcy, and HOA fees continue to accrue while you wait for the bank to foreclose, you will be responsible for those fees until the title is transferred. In some cases, the HOA is paid out of the proceeds of the sale of the property; otherwise, the HOA can sue you for post-bankruptcy HOA fees. Some choose to get around this by selling the property as a short sale or waiting to file for bankruptcy until after the bank takes the home to foreclosure. If you give up your property, you can discharge the unpaid dues that accrued up until you filed for bankruptcy.
However, if you choose to keep your home during Chapter 7 bankruptcy, then the HOA is essentially in the same position as a bank holding a mortgage on the property. As a result, you should plan to pay HOA dues that are owed before and after filing for bankruptcy. In other words, as long as you own the home, you accrue HOA fees going forward, and they will have to be paid (at least until you no longer own the home).
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, debtors typically come up with a repayment plan that lasts between 36 and 60 months. During this time, you can repay your past due HOA fees, and the stay that you are provided with prevents the HOA from foreclosing on the property (while the bankruptcy is open). In addition, as a general rule, if the HOA bylaws allow for the HOA to collect attorney’s fees and other fee assessments, then you could also be on the hook for those as well. However, note that those fees must be considered to be “reasonable” by the courts.
The Best in Florida Bankruptcy Assistance in Jacksonville, Florida
If you have concerns about the fees, your bankruptcy attorney can assist you. Our attorneys provide legal bankruptcy assistance for consumers in Jacksonville and surrounding areas of Florida. Contact us today to request a free consultation and find out how we can help ensure that you and your financial future are protected.