Dear Bankruptcy Adviser,
I filed bankruptcy in 2009. I have a condo with monthly homeowners association, or HOA, dues. The lender has still not foreclosed on the condo. I have not set foot on the property for more than three years. I have been told that I am responsible for the HOA dues and assessments that have accrued since I vacated the property. Is this really possible? Is there any suggestion or hope that I will be relieved of this burden? If so, do I have any options?
-- Amy
Dear Amy,
I truly hate to give you more bad news, but you are responsible for the unpaid HOA dues. I always make sure my clients know they are responsible for all HOA dues and assessments that become due after filing the bankruptcy case -- even when those clients walk away from the condo.
The bankruptcy code specifically addresses this issue. The code states that all "fees or assessments that become due and payable ... to a membership ... or homeowners association" after filing for bankruptcy protection are exempt from discharge. This means you owe every fee and assessment that came due after filing your bankruptcy. Anything you owe prior to filing the case was included in your bankruptcy. This might help you reduce the overall liability.
It is also important to note that you are responsible for pre- and post-filing HOA dues when you are keeping your condo. You cannot eliminate past-due HOA dues with a bankruptcy and still remain a condo homeowner.
While some might think this unfair, the HOA needs the monthly payment and assessments to operate and maintain the condo complex. Whether or not the HOA was charging too much or did not do a good job is irrelevant here. The HOA could not rent or sell the unit to another buyer until the bank foreclosed. As a result, the other homeowners had to pay more or receive fewer services.
You have four options.
Work out a payment plan. I believe you need to contact the HOA and work out a payment plan. Hopefully, you can negotiate an affordable payment.
Ignore the HOA, and hope you don't get sued. The HOA would rather not sue you for payment because that costs money and takes a long time, but it is very possible you will be sued.
You can also look at the statute of limitations in your state to determine whether the HOA still has the right to sue you. The statute of limitations is the period of time within which legal proceedings must start in order to enforce a right or bring a legal action. You ought to research when that time period starts and ends in your particular state.
Please note that the statute period does not run while your bankruptcy case is open.
File Chapter 13 bankruptcy. You can pay back some or all of the balance over the next three to five years in a Chapter 13 reorganization bankruptcy. While it is another bankruptcy, you could wipe out some of the outstanding balance as long as you file this new bankruptcy case four years from the date you filed the Chapter 7 case. This option can also be used as a negotiating tool when talking to the HOA legal representative.
File Chapter 7 bankruptcy again in 2017. I assume you received a discharge in your 2009 case. If so, you can file another Chapter 7 bankruptcy eight years from the date you filed your prior case. It might be hard to wait that long if you get sued, but that is always a future option.
Hopefully, you can negotiate an affordable payment with the HOA, one that does not financially hurt you too much and keeps them from pursuing you in court.
Ask the adviser
To ask a question of the Bankruptcy Adviser, go to the "Ask the Experts" page and select "Bankruptcy" as the topic. Read more Bankruptcy Adviser columns and more stories about debt management.
Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.
More From Bankrate.com
