ELIMINATION OF THE DEBT: By filing for Chapter 7 bankruptcy and you owe the HOA, you may be able to eliminate that debt. This is most important if you intend to surrender your home or condo in the bankruptcy, but if you intend to keep your home or condominium, you will have to keep paying the dues in order to keep the property. If you do give up your home, you won’t be able to discharge any HOA fees that accrue after you file for Chapter 7 bankruptcy and that monthly debt continues each month (it is new debt) until you either sell the property or it goes to foreclosure sale. The mere filing of the foreclosure does not stop the HOA monthly fees from being assessed until the lender buys it at the sale date at the foreclosure sale or it is sold to a third party.
WHAT HAPPENS WITH THE HOA FEES AFTER I FILE: The fees subject to discharge include those that exist up to the date of filing bankruptcy? Additional fees that accrue after you file for bankruptcy, like other post-bankruptcy debts, (such as new utility charges or repairs to your home) will not be discharged, since this is new debt. Remember that a bankruptcy filing only discharges what was owed before you file. Debt that accrues after filing is new debt and new debt is not discharged. Most often by surrendering your homes you should not have to worry about post-bankruptcy HOA fees if you are selling the property or it goes to foreclosure sale and then sold to a third party buyer. This non payment of post filing HOA fees is because the HOA fees are paid from the proceeds of a foreclosure sale or paid by the new owner at that closing and if the HOA filed its amounts due as a lien against the property. There is a risk in taking this waiting to see what happens approach since the new HOA fees accruing after the bankruptcy filing if the homeowner’s association is not paid for the fees out of the proceeds of the sale of the property, or does not want to wait to be paid, then the HOA can sue you personally for any post-bankruptcy HOA fees during the time the property was titled to you. You still own the house until it is sold to a new third party or the bank obtains title at the foreclosure sale. Once again post filing new debt is not discharged only prefilling debt is discharged. This new debt not being discharged cannot be stressed enough!!
If you intend to keep your home in a Chapter 7 you should pay the HOA assessments as you would the loan mortgages on the property. You should pay HOA fees that are owed. If you don’t, the HOA could foreclose on your home since the lien remains on your home, even if your personal liability for past dues is discharged. A lien is not released, the debt is for the amount you owed before filing, but the lien is not removed and is still there!!