chapter 7 past due hoa dues

[jennifer212]

hi everyone,
didnt know if anyone had some advice. we filed chapter 7 in oct.2010, discharged in apr.2011. we reaffirmed our mortgage because we intend to keep the house because we were fortunate to get approved for hamp with a principal reduction. i am current on our hoa fees now but several yrs ago we got behind but i couldnt discharge them in our bk because we are keeping the house. i recieved a letter in the mail the other day from the hoa's attorney stating a voluntary dismissal with prejudice. i called them to find out what that meant and i was told they are no longer coming after us for the fees but are still going after our property for the past due fees which i guess means they will try to foreclose on our house. my options are try and get a payment plan with them but the president of the hoa has a personal issue with us so he hasnt been making this pleasant for us, the other option is file a chapter 13 on our past due hoa dues and make payments thru the trustee, my only concern is i am afraid that it will cause a problem for our hamp. we are in the trial part of the program. we have one more trial payment and our final docs will be sent out. thanks for your help.
jennifer

[bcohen]

I don't know what to tell you. Florida is one of the few states where a HOA has an "automatic lien" on your property the moment that the dues are owed and not paid on time. In most states, the HOA has to file a lawsuit, win a judgement, and THEN proceed to place a lien on the property. I do not know if Florida allows a HOA to foreclose their lien, or if they merely have to hold onto it until the house is sold or refinanced.

I am surprised though that you could not discharge the back dues in your bankruptcy. Everything I have read on the subject, as well as the experiences of some of my friends here who filed is that you CAN discharge HOA arrearages, but must remain current going forward after the bankruptcy. Again, maybe this is a peculiarity of the laws down in Florida.

The unfortunate thing is that you reaffirmed the mortgage, and no doubt the HOA's collections law firm is aware of that fact. If you had NOT reaffirmed the mortgage, then you could call the HOA's bluff, as any lien they might have on the house is extinguished when the property forecloses unless it miraculously sells for more than the mortgage payoff, which is highly unlikely.

[justbroke]

Yes, you can discharge HOA fees as to yourself, but they are secured in Florida. This is the catch 22. While the HOA can't come after you personally, they can foreclose upon the property. HOAs in Florida enjoy a statutory super-lien priority unlike any other -- except federal tax liens. They can foreclose very quickly! However, the bank will usually step in before this happens to protect the bank's interest.

Just because one can discharge their promissory note on their property in bankruptcy, doesn't mean the lender has no recourse. The same works for HOAs in State, like Florida, that grant a statutory lien. Even though the debtor doesn't personally need to pay and can't be sued... the HOA can go after the property.

On January 1 of every year, the HOA automatically gets a lien against the home, in Florida, for the same amount the dues were the prior year. They don't need to file a lien and they get priority over everyone else -- except the IRS.

Just for everyone's general information, in Florida, HOA dues are in fact your issue post-petition. While the bank is responsible for up to 12 months of HOA dues or 1% of the value of the property (whichever is lower), this can't happen until there's an actual foreclosure. This is why the dues are usually paid by the Bank if the property is foreclosed upon by the HOA. However, if you aren't leaving and aren't being foreclosed upon by the Bank.. then you are 100% responsible!

Also, for those studying Florida foreclosures when there's an HOA involved, this law is ONLY for mortgages recorded after July 1, 2008. If the HOA forecloses on a mortgage that was recorded prior to July 1, 2008, then the HOA's claim is subordinate to the any "lending" lienholder who is in the first position -- a "first" mortgage.

There's a VERY GOOD writeup on HOAs and foreclosures in this document.

http://www.gray-robinson.com/Elerts/110603_Lender_Liability.PDF