Back Homeowners Association Dues

[spearmint]

Can you get rid of homeowners fees in a Ch13? What about their legal fees?

[justbroke]

While my answer should be tempered with underlying State non-bankruptcy law and how the debt is treated (as a statutory lien or some other secured lien)...

Home Owner Association (HOA) dues can be discharged if you are surrendering the associated property. Any fees which came due prior to filing, are discharged should you surrender the property.

If you are keeping the property, then you will have to pay back those pre-filing HOA fees while in your Plan.

Any fees due after the filing are your responsibility, regardless of whether you are surrendering or not, until such time that the there is a new recorded deed with a new owner. If you are surrendering the property, then you are responsible until the new deed is recorded. If you are keeping the property, then you are responsible for the post-filing fees as they come due. Otherwise, the HOA can file for a motion for relief from stay and actually foreclose on the property while you're in the Chapter 13.

[spearmint]

While my answer should be tempered with underlying State non-bankruptcy law and how the debt is treated (as a statutory lien or some other secured lien)...

Home Owner Association (HOA) dues can be discharged if you are surrendering the associated property. Any fees which came due prior to filing, are discharged should you surrender the property.

If you are keeping the property, then you will have to pay back those pre-filing HOA fees while in your Plan.

Any fees due after the filing are your responsibility, regardless of whether you are surrendering or not, until such time that the there is a new recorded deed with a new owner. If you are surrendering the property, then you are responsible until the new deed is recorded. If you are keeping the property, then you are responsible for the post-filing fees as they come due. Otherwise, the HOA can file for a motion for relief from stay and actually foreclose on the property while you're in the Chapter 13.

So if I were to surrender the property, I still have to pay the dues even if I am living elsewhere - until someone buys it? Wow! In this market thats a few years.

[justbroke]

So if I were to surrender the property, I still have to pay the dues even if I am living elsewhere - until someone buys it? Wow! In this market thats a few years.

The technically correct answer is, yes!

What happens in practice varies. Sometimes, the lender, when they acquire the property and it becomes REO or "Bank Owned", will pay all fees, taxes and liens to get a clean title. This happens more than half the time, from my observation.

However, the Bank is not obligated to pay the HOA fees and they remain the responsibility of the debtor, by operation of the Bankruptcy Code.

[spearmint]

Thank you.

Do you know if you can get rid of HOA legal fees in a Ch13?

[justbroke]

Thank you.

Do you know if you can get rid of HOA legal fees in a Ch13?

Only if the HOA Rider or HOA Regulations don't include any clauses as part of the "contract". This has always been one of those things under standard contract law.

Generally, when you get a mortgage or otherwise purchase a property in an HOA (PUD or other planned development), you get a Rider which basically states taht you'll abide by the Covenants and Rules that govern the area. The Covenants or the Rider should provide for the payment of legal fees.

If it does provide for them, then you will have to pay them as part of your payment plan. If there is no documentation of that, or you can prove that you are not covered by that provision, then you could "sue" (adversarial proceeding / complaint) to get them removed. It's quite possible that you could also challenge any claim they would submit in your Chapter 13 estate, and claim that the legal fees aren't enforceable under underlying State non-bankruptcy law, since have no legal or binding affect under 11 USC 502(a).

But that's just me.

[spearmint]

Can anyone point me to the actual bankruptcy law that states that if you owe homeowners association dues you have to pay them in Ch13 if you want to keep your home and that you can discharge them if you do NOT want to stay in your home.

[justbroke]

Can anyone point me to the actual bankruptcy law that states that if you owe homeowners association dues you have to pay them in Ch13 if you want to keep your home and that you can discharge them if you do NOT want to stay in your home.

No. I can't, because what you wrote is not that cut and dry. There is no single paragraph in the code which reads as you wrote above.

First, this is controlled by 11 USC 523 which has to do with the discharge. This section (11 USC 523) talks about what you can't discharge.

if you owe homeowners association dues you have to pay them in Ch13 if you want to keep your home

Since association fees are consensual liens, they are secured debt, and you must address secured debt in your Plan by surrendering or redeeming the property (which secures the debt), or provide for payment of that debt within the Plan. So, it is naturally concluded that if you want to keep the property (home), you have to provide for repayment of the secured debt. (While the debt can be discharged, 11 USC 523 doesn't deal with talking about secured debt on property you wish to retain. In order to retain secured property, you must make adequate protection payments and/or provide for the debt within the Plan.)

you can discharge them if you do NOT want to stay in your home.

While 11 USC 523 says that you can discharge the association fees, it does so by specifically stating that you are responsible for everything after the filing of the petition, "as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot". That's why you have to pay what happens after the filing of your petition, even if you give it up!

In reality, many Banks pay all the fees when they foreclose on the property, so they get a clean title. However, not all of them do that, and you could legally still owe the (post-petition) association fees!

I think the problem that most laypersons, including myself, get in trouble looking at 11 USC 523, is you see that it reads that "nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;". This just means prior debt can be discharged. However, if you keep the asset which secures the debt, you have to pay the debt!

This is no different than keeping your home absent homeowner's fees/due. Think of the arrearages on a mortgage as the "Association Fees". If you surrender your home, you don't need to pay the arrearages. However, if you keep it, you need to pay the arrearages, and the payments which come due in the future, as part of your Plan. Yes, while you could discharge the arrearages, by surrendering the property, you can't get the benefit of discharging the arrearages without surrendering the property!

Hope that makes sense!

[spearmint]

Okay, I am totally confused. My attorney is telling me that past due homeowner dues can be discharged (i.e. not paid at all) in Chapter 13 and I can still live in the condo.

I thought that if you want to continue living in it that you HAD to pay the arrearages although you could do so through Chapter 13, and that if you did not want to pay them, you would have to give up the home. According to my attorney I can discharge them (not pay) and still continue living there.

So, in short, he's telling me one thing and I have read about another.

[justbroke]

Okay, I am totally confused. My attorney is telling me that past due homeowner dues can be discharged (i.e. not paid at all) in Chapter 13 and I can still live in the condo.

This really depends on underlying State non-bankruptcy law in whether homeowner and condo association dues are considered consensual liens, and therefore secured by the property.

I thought that if you want to continue living in it that you HAD to pay the arrearages although you could do so through Chapter 13, and that if you did not want to pay them, you would have to give up the home.

Yes, arrearages can be paid through a Chapter 13, and I hope I didn't confuse that matter. I wrote that the arrearages must be addressed by the Plan.

According to my attorney I can discharge them (not pay) and still continue living there.

I assume that you mean "association dues" by "them". In a Chapter 13, you would have to pay "them", if you are keeping the property that secures that debt The reason is that the lender (they) have a consensual lien and can foreclose upon your home if you stay in it and don't pay it. Again, it would depend on underlying State non-bankruptcy law as to whether that is a consensual or statutory lien when it comes to association dues (fees) in your State.

So, in short, he's telling me one thing and I have read about another.

I would get a very good clarification on the homeowner dues. Again, 11 USC 523 says they can be discharged, however, discharged doesn't mean that a secured creditor doesn't get to exercise its rights to foreclose for non-payment.

Remember, you can file Chapter 7 and discharge your mortgage. However you don't get to stay in the home, as the creditor will exercise its foreclosure rights on the property that secures that mortgage. Think of HOA fees as no different. In many States, HOAs have enormous and almost unilateral foreclosure rights that surpass anything a Bank could do to you! They can foreclose for $300 if they want! (This is why if your Bank finds out the HOA is about to foreclose, the Bank will show up at the auction to protect its interest. However, some Banks fail to get notice (as co-defendant) or somehow mess up and the Bank ends up with no collateral!)

[spearmint]

It really seems that "stay" = "pay" which is what I understood.

I am really concerned that the attorney is telling me the opposite, though. I did ask another attorney and he told me stay = pay.

I am thunderstruck at the discrepancy in what different attorneys tell me about this very important issue - and very worried - as I do not want to proceed when I am unsure of what I am being told.

[justbroke]

It really seems that "stay" = "pay" which is what I understood.

I am really concerned that the attorney is telling me the opposite, though. I did ask another attorney and he told me stay = pay.

I am thunderstruck at the discrepancy in what different attorneys tell me about this very important issue - and very worried - as I do not want to proceed when I am unsure of what I am being told.

For some reason, that 11 USC 523 is interpreted differently by different lawyers, and certainly by us laypersons.

I will again state that it really depends on your State laws as to whether the assessment from the association is secured automatically by statute, or consensual due to the terms of your HOA contract, Covenants, and/or HOA Rider.

[spearmint]

For some reason, that 11 USC 523 is interpreted differently by different lawyers, and certainly by us laypersons.

I will again state that it really depends on your State laws as to whether the assessment from the association is secured automatically by statute, or consensual due to the terms of your HOA contract, Covenants, and/or HOA Rider.

State is Michigan.

I suppose I will just have to hope that the attorney knows what he is doing.

[justbroke]

State is Michigan.

I suppose I will just have to hope that the attorney knows what he is doing.

Michigan may be a State where the HOA would have to record a lien first, in order to foreclose. If they didn't record the lien prior to you filing your petition... you probably can discharge the pre-petition assessments. (I'm no lawyer, but that may be the thing.)

If they have already recorded the lien, then they have a perfected security interest in your property, and you can't just discharge it, if you're keeping the property.

However, if you were to fall behind post-petition, they just file for relief from stay, record the lien, then proceed with foreclosure.

[BK2008]

How does this work in a 7??

I filed in April 08, discharged July 08, surrender house in BK, received a HOA bill in October (while in the start of the foreclosure process), title transferred to Freddie Mac in January/February, and then received another billing from the HOA for another 6 mos this month.
Why would I be liable for that October billing if I 'gave up' the house? (Which covers 6 months arrears) I figure the worse case..they foreclose (on the bank)?? Or me ?? OR they try to sue me (if they can find me) OR send it to collections (SOL is only for 2 or 3 years, I think)

BTW, this is a great thread. Have been wondering about the hoa thing for a bit.