Stay of relief question

[goldstar]

So I'm less than a yr into my 5 yr plan. Kept primary residence. Previous primary (which had become a rental, unsuccessfully) was given up during the BK process.

I get a notice in the mail that it needs some maintenance from the HOA there...I ck the ppty appraiser website and notice ppty is still in my name!? I forward letter to my attorney and he reveals there was a stay of relief granted by court so they can maintain their rights to pursue financial remedies. I never rec'd a copy of this. NEvertheless, I'm freaking out that the HOA can still come after us for next 5 yrs. I was wondering why the bank hadn't transferred title...now I see why. Atty says law is unsettled/unclear on this matter, per the courts.

Has anyone encountered this situation? It's crazy that we went thru this process and - in theory - we'd still be on the hook to the HOA for expenses post-BK. I thought we dont even own the ppty any more..ugh

[justbroke]

I don't know why the attorney would say the law is "unsettled". The law is quite clear on property ownership. You own the property unless and until the lender completes a foreclosure, the home is sold, and the recorder of deeds actually records the new deed. In Florida, this is absolutely the law. (People have tried "reverse foreclosures" and suing the lender to force them to foreclose.) You cannot force a lender to foreclose.

Surrendering property in a bankruptcy does not remove your ownership rights at all. Even if the lender filed for relief from the automatic stay (RFS), that just means that they want to be "able" to exercise their rights. Nothing can compel them to do so. In Florida, you will be responsible for all HOA fees that become due after you filed. You should not be charged for pre-petition bills.

One strategy is to allow the HOA to foreclose on the property. Some HOAs will foreclose on the property if you have some deficiency for 30 days or longer. Perhaps you can tell your HOA that they are best served by foreclosing and letting the lender know. However, you are legally obligated, in Florida, to pay HOA fees that come due with the exception of 12 months worth of dues (which remain the responsibility of the lender).

[goldstar]

Thx. The attorney has responded that the issue that is not 100 percent clear is to whether we could be held personally liable for the post-petition HOA fees. He thinks that the better answer is that we would not be responsible for the post-petition fees where we had moved out of the property prior to the bankruptcy filing. He doesn't think they'll come after us, but if we want to be aggressive, we can file to go to trial to not defend the foreclosure, but rather to encourage the lender to foreclose, etc. He says if for some reason the HOA comes after us we can take the issue to BK court.

[justbroke]

It's not a theory. According to the Bankruptcy law, as amended in 2005 (BAPCPA), you are NOT liable for any homeowner association fees that came due PRIOR to filing. They are discharged. However, in Florida, HOA fees enjoy a special statutory lien, so if you wanted to stay in the property, you'd have to pay pre-petition HOA fees. Post petition, it is also quite clear. The bank would owe the HOA for the first 12 months of the fees, or 1%, whichever is less. The problem is that most foreclosures in Florida are taking about 2 years, so the owner would be on the hook for about a year of HOA expenses.

I don't know why your attorney is using wording this as though this is not the law. You will not receive any sympathy from the Florida Bankruptcy court for post-petition HOA fees. That is also quite clear in the code in 11 USC 523.

11 USC 523(16) (A discharge under... does not discharge an individual debtor from any debt...) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but 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 is quite clear and is the law. While many HOAs don't pursue the individual, the HOA can continue to bill you and employ process to collect on post-petition HOA fees!

Here's the Florida law which makes the responsibility of the HOA fees the bank's responsibility... up to 12 months worth...

Florida Statute 720.3085(c) Notwithstanding anything to the contrary contained in this section, the liability of a first mortgagee, or its successor or assignee as a subsequent holder of the first mortgage who acquires title to a parcel by foreclosure or by deed in lieu of foreclosure for the unpaid assessments that became due before the mortgagee's acquisition of title, shall be the lesser of:

1. The parcel's unpaid common expenses and regular periodic or special assessments that accrued or came due during the 12 months immediately preceding the acquisition of title and for which payment in full has not been received by the association; or

2. One percent of the original mortgage debt.

[forgotten]

I wonder if in your plan you could attempt to reject the contract with the HOA as an executory contract? You are agreeing to continue to pay them XX amount for as long as you own XX... don't know, just thinking out loud.

[justbroke]

That, rejecting it as an executory contract, in Florida won't work. HOAs are done by Riders to the Mortgage. SOme HOAs even have statutory taxing authority -- albeit they assess their fees through non ad-valorum taxes and the "fees" are collected by the collector of taxes.

It is an interesting suggestion, but it's not a contract.

[goldstar]

justbroke - thx SO MUCH for all the detailed thoughts. However, is it possible that the attorney is saying that what is unsettled is how this all applies when the variable of the homeowner living in/not living in the home is applied? Again, he says we're likely not liable b/c we moved out 5 years before pre-petition (not that 5 yrs matters, but ultimately, that it was before we petitioned and so were not living in the home). In other words, the spirit of the law above would be to prevent folks who do a BK, continue to live in the home, and try not to pay the HOA fees/dues?

[justbroke]

There are no variables. The law is very clear and there is caselaw to support it as well. HOA fees and dues are based on ownership, not residency in the home. Whomever receives the bill is the person who has legal title to the property. I don't know why living there has anything to do with this when the law is quite clear that it's the titled owner.

[goldstar]

SO...realizing you're not an attorney...I'm curious what your thoughts are as to the "endgame"...meaning, how can I do what I "thought" was going to be the outcome, which is to say - relieve myself of all title to the property, the bank/HOA foreclose on the property, etc.? The attorney suggested a suit is the only thing that would encourage this. :-/

[justbroke]

Absolutely nothing. There have been others who tried the reverse mortgage route and only met it with failure. The only successful party to successfully do this was several home owner associations in Florida's 5th circuit. The lender does not have to foreclose and you can't compel them to. In the case of the HOAs, the lender had actually filed a foreclosure lawsuit and the HOA was named as a defendant.

If you are able to force a lender to foreclose -- as a private individual -- then you will be the first I've read about. I suggest talking with some "foreclosure" attorneys to get the real strategy on this. (Especially if you were asking these questions of your bankruptcy attorney. You need an attorney who deals specifically with foreclosures and/or foreclosure defense.)