There are many reasons for people having to declare bankruptcy, but in the last few years the primary cause of bankruptcy has been property debt. Oddly enough in many cases in addition to falling behind on their mortgage payments a lot of debtors also cease to pay for the association fees (HOA Fees).
So the big question here is whether or not you can discharge HOA fees via bankruptcy.
The answer to this question really comes down to when you actually incurred those homeowner fees in the first place. Very simply put it comes down to when those fees actually became due, so for example in a Chapter 7 bankruptcy filing any HOA fees which became due before you filed for bankruptcy can be successfully discharged, with most courts treating these fees the same way they treat credit card debt.
Now the proviso here is that although any existing homeowner fees can be discharged, any HOA fees which are incurred after you\’ve filed for bankruptcy are still yours to pay, and this fact will remain in place for as long as you own the property itself. This includes during the foreclosure process and right up to the moment that you lose legal ownership of your property and the title of the property is transferred to another person or entity – all those existing homeowner fees will be due for payment by you.
In many cases Debtor wishes to surrender their homes via bankruptcy. It is important to understand that you are still the owner of the property, (i.e., Debtor name is still on the deed)until the sheriff’s date. Therefore, the Debtor even though he is surrendering his obligation to pay for the mortgage he or she is still responsible to pay for his association fees until the sheriff’s date.
The trap which most property owners fall into when declaring bankruptcy is that once upon a time all of the HOA fees which were due at any time during a bankruptcy and/or foreclosure were covered by the protection of the chapter 7 filing, but times have changed. This can then lead to a pretty unpleasant surprise for you when you think you\’ve successfully discharged any obligation relative to your home, only to find out that there is still monies owed for unpaid HOA fees. What\’s even worse is that any continued failure on your part to pay your HOA fees will result in penalties and interest being applied to them, and the further behind you fall in HOA fee payments the quicker your debt mountain will start to grow again.