To Pay or Not to Pay HOA Fees

[nioka]

I have ask for and gotten a lot of advice and all of it good. However I realize that every case is different and one size does not fit. I talked to one attorney who told me not to pay. I talked to third attorney today who told me to pay. I have had mixed suggestions here at the forum.

It was suggested to me, and I thought it made sense, to continue to pay the HOA fees. The reasons being no future debt collections and most important that if a bank realized that the HO was willing to continue to pay the HOA fees they would be more apt to foreclose and take possession.

I came across this article I think is very interesting. I believe it supports not paying HOA fees. The attorney I spoke with today said that my mortgage company is especially slow at foreclosure sometimes not responding to his office for more than a year. It appears in this article that not paying the HOA fees may cause HOA's to push the banks to foreclose and take possession rather than dragging their feet. While I am prepared to stay until evicted I would rather leave in the first half of 2014.

I thought about not paying the HOA fees and banking the money in a separate account until the possession issue is resolved.

http://www.bankingmyway.com/real-estate/foreclosures/overlooked-foreclosure-factor-hoa-fees

[justbroke]

Be very wary of the advice of not paying. I speak from experience...

If you do not pay your HOA dues, your HOA can come after you personally for them. That means collection activity, attorney fees, a judgment, and yes, you might get that foreclosure that you wanted. The downside is the negative impact on your credit, unless you really don't care. But, let's get serious about this. If the bank is slow and the HOA decides that they don't want to foreclose, but sell the debt to a collector that wouldn't mind dunning you and suing you, then you're in a different position.

Some HOAs may even foreclose on you, take over the property, evict you, then rent it out while not paying the mortgage company (to get them to foreclose!). In the end, the HOA seems to always get their money! The only losers are the homeowner, the bank, or the new buyer because one of those three will pay.

You need to really consider your strategy. (That article is over a year old and mentions exactly one case, the only one I have ever read about in Florida, regarding a reverse foreclosure. I think that the article causing confusion between a reverse foreclosure with an actual HOA foreclosure.)

[nioka]

Justbroke,

Thanks for your post.

I agree. There seems to be several facets on this issue and the fact is predicting how a HOA will react is almost impossible. The only thing I can say for sure is that my income is bullet proof. However, as you point out the HOA have other means at their disposal especially in TN. I would like to leave ASAP but If the bank delays action I could stay here indefinitely or until they do take possession. According to the attorney I talked to yesterday I would not be responsible for taxes or insurance. Therefore paying $100 in HOA fees is dirt cheap living.

One other suggestion I had was that if I wanted to leave I could rent the house on a month to month basis and continue to pay the HOA fees until the bank took possession. However, my ethics would not allow me to do that without informing a possible tenant. On the other hand I live in a golf resort area and could also rent this house on a weekly basis as a vacation rental.

Once again, there are several different opinions on this subject. If one knew the history of a particular HOA then one could predict a likely outcome.
However without this knowledge it may be better to assume the HOA to be aggressive. The most cost effective solution would be to pay the HOA fees and not chance any action from the HOA.
The second aspect is that the attorney told me typically in TN the time from filing to discharge is 3 months. After filing the HOA could not take any action until my discharge at which time I would resume paying the HOA fees.
(The only thing that bothers me with this instruction from an attorney is that if at my discharge the HOA raises legal issues and I need to hire an attorney then the $300 I saved by not paying the HOA fees would be lost and I could owe more to the attorney than what I saved).

[tobee43]

jb gives excellent advise as always. however, do not forget that HOA liens are subordinate liens in most states and will outlive your bk. no amount owning the bk from you HOA will be forgiven. right now i work with 6 HOA's and i have begun a new process to foreclose while bank possessed. so i would be very careful about not keeping up with the dues. this way we don't go after the poor owners that have had enough heartache.

i'm not fimilar with TN HOA laws. florida just went through a ton of changes i'm STILL reviewing. wow, in TN they moved fast...we try to work with the home owner first before doing anything, but NOT if they are in or went bk. i'm just attempting to get a different mindset here. go after the banks and NOT the people. however, an HOA can only do that after the home is foreclosed on.

[nioka]

http://www.lawqa.com/qa/are-home-owners-association-hoa-dues-typically-discharged-in-bankruptcy

Therefore the only HOA fees I would be responsible for are those that arise after discharge. The HOA fees amount to $100/ month and I would have no problem or issues with paying that amount.


I was lucky enough to find a free legal aid who helps seniors. He told me he has a lot of experience with seniors with foreclosures, with HOA's, and even the HOA I am in. After looking up some figures online he told me my house is mortgaged for $120k and yet the market value is only $90k. He said no HOA is going to go after a house like that. However he did say they would be threatening and beating the drums to get me to pay on my own. My income is bullet proof and it would be a waste of time and money to pursue any legal action as regardless of the outcome nothing can be collected from me. He said the HOA may try to get the bank to foreclose but my bank is very slow in the foreclosure department. It seems I could be in this house for a long time.
I asked when was the best time to file. He said there really is not a best time in my case with the exception of the TN exemptions. I am allowed $10k in exemptions. My car is about $4k allowing me to bank another $6k and I have nothing else of value. If I were to hold back on filing I could exceed my maximum exemptions and have the excess applied to debt. He thought it best for me to file soon and remain in the house saving as much I could. He told me that paying the HOA fees after my BK discharge was up to me because there is nothing the HOA can do.

I think the fact that I am in an upside down mortgage, and that I am a senior with protected income, sets this apart from other BK's.

I think that post-discharge I would pay the HOA fees simply to keep the peace until the ownership is transferred out of my name.

[tobee43]

google HOA Tenn laws and see if they are subordinate liens before you decide to think you should or should continue to pay. here in florida you must pay after the stay is lifted, after that point it's in YOUR lap until the foreclosure which could take years. here in florida they would jump even on a house worth 90k and underwater, so i would consider yourself lucky on this.

i would just make certain, if it were me to continue to pay them. let me try to give you an example why. maybe not were you are, but the HOA's in this state are very powrful, if you do not pay your HOA dues then here you get a monthly late fee assessment that continues to accumulate and begins to add up with late fees, other charges, etc., upward into the thousands of dollars, that's when the HOA moves in and attempts the foreclosure.

i would also not be sure you are allowed to have 6k in your bank account. in florida the day of filing you are only allowed $150 dollars. free advise is good, as with this board, but i would get the information directly from your atty to make certain.

[bcohen]

As was already said on your other thread, you are in no rush to file for bankruptcy. It would be best to NOT FILE and WAIT until the bank or your HOA forecloses. In that case, you would have no reason to pay the HOA ever again. However, if for some reason, you foolishly choose to file for BK while the house is still in your possession, then you must keep paying the HOA going forward! If not, they will sue you personally for the money!

[tobee43]

As was already said on your other thread, you are in no rush to file for bankruptcy. It would be best to NOT FILE and WAIT until the bank or your HOA forecloses. In that case, you would have no reason to pay the HOA ever again. However, if for some reason, you foolishly choose to file for BK while the house is still in your possession, then you must keep paying the HOA going forward! If not, they will sue you personally for the money!

exactly!

[justbroke]

tobeee, you are going to love this. I'm currently tracking cases, in Florida, in the likes of recent In Re Mcneal decision that was appealed to the 11tch Circuit. The 11th Circuit (Florida, Georgia, Alabama) opined that the Folendore decision was still good law and that the SCOTUS Dewsnup case did not affect Foldendore!

As you know this is the lien strip issue for a Chapter 7. However, I have read at least 9 cases in (central) Florida where HOA liens were stripped in a Chapter 7!!! Exactly for the reason that almost all of the HOAs, while having a statutory superior lien, subordinate their lien to the first mortgage!

That's right, you heard it here! You an strip a "wholly" unsecured HOA lien in a Chapter 7 (or Chapter 13) in Florida!

It's very interesting.

[tobee43]

tobeee, you are going to love this. I'm currently tracking cases, in Florida, in the likes of recent In Re Mcneal decision that was appealed to the 11tch Circuit. The 11th Circuit (Florida, Georgia, Alabama) opined that the Folendore decision was still good law and that the SCOTUS Dewsnup case did not affect Foldendore!

As you know this is the lien strip issue for a Chapter 7. However, I have read at least 9 cases in (central) Florida where HOA liens were stripped in a Chapter 7!!! Exactly for the reason that almost all of the HOAs, while having a statutory superior lien, subordinate their lien to the first mortgage!

That's right, you heard it here! You an strip a "wholly" unsecured HOA lien in a Chapter 7 (or Chapter 13) in Florida!

It's very interesting.

yeppper! you have love judge cristol. although there is strength in numbers so it's good that georgia threw their hats into the ring. now what about the rest of the eleventh circuit?? poor alabama.


oh!!! i have to ask is alabama included since would that effect the entire 11th district? i am lazy and never read the entire decision what was a big 4-5 pages. i am bad. i just read the outcome.

[nioka]

I have met with three Tennessee attorneys and all have assured me that any HOA fees/fines listed in a bankruptcy will be discharged. This was also supported by a legal aid.

All attorneys have told me that I would be responsible for the HOA fee after discharge.

I have also been advised that it would be unwise for the HOA to attempt a foreclosure with my house in an upside down mortgage. Being a junior lien holder the HOA would need to pay the primary lien holder before they could take possession. Regardless of who takes possession I would not be responsible for the HOA fees.

My mortgage company has a history locally of not acting on foreclosures in a timely manner. This is especially true with HOA foreclosures. The longer I delay filing the more action I invite from other creditors.

One creditor is the local electric company who financed my heat pump with a lien on the house. I worry about this one most of all because the loan payment is tied in with the electric bill. It is possible that I could have my electric cut off. (This electric company is particularly aggressive. They shut off the power to a disable senior woman who was dependent on an oxygen machine. The result was she died).

While I see the logic of holding back to file until foreclosure I don't see how I could manage that tactic. For myself I think filing the first of the year and paying the post-discharge HOA fees until some entity takes possession is my best route. If I were to do this I could put a lot of money away.


One house owned by an elderly lady who had to move to an assisted living facility ended up selling her home for $55k even though the market value was $130k. (I believe the reason was the HOA fees). A couple bought the property but divorced after six months and the same house went back on the market for $95k. Still well under local market values. Even at this low price the house remains on the market. Locals are frustrated in that this one property is bringing property values down throughout the neighborhood.
Secondly, on property purchased five years ago for $300k went on the market last year for $290. After six months of no interest the owner listed with another RE agency and it is now for sale for $265k.

[bcohen]

Nothing you have posted above changes my position. There is nothing which any creditor can do to you, even if they sue and obtain a judgment! What are they going to do, put a totally unsecured lien on your "underwater" house? Garnish your Social Security or pension? Not gonna happen. The electric company cannot legally disconnect your service for nonpayment of this loan, either. By law, they must separate the bill into charges for energy usage and taxes (which you must pay or else they can disconnect) and into other charges (which they cannot disconnect you for if you don't pay).

In any case, you can still live in the house--even while not paying the HOA--until your bank forecloses. At that point, you would file for bankruptcy, ALL of the back HOA dues will be discharged, and you won't owe anything else going forward.

[nioka]

bcohen,

Thanks for the support.

When I asked about the HOA dues after discharge one attorney laughed and said they can't do anything to you so don't pay it. I guess the different for me is my income is limited to SS and and ERISA pension.

I did ask the last attorney I spoke to about timing. He told me it made no difference in my case I could file anytime I wanted to. His only caution was that once I file I am protected from my creditors.

I am in TN and this is a far better place to be than FL for bK.

[justbroke]

I do not understand the Florida reference. Florida is actually one of only a few places where bankruptcy is best (when you own real property). Recent decisions by the Florida Supreme court have even preserved our "unused" homestead exemption as just that... an unused homestead exemption rather than a "benefit" of a homestead exemption.

Florida is actually the only -- if not one of just two or three - states that provide, by law, that the bank is responsible for 12 months of HOA dues or 1% of the mortgage balance (whichever is less), upon foreclosure.

Florida's and Tennessee's bankruptcy exemptions are about the same but Florida has an unlimited homestead exemption which is why many affluent people -- especially pro-sports stars and the uber-rich -- purchase property in Florida.

(It's a rather long story, but the Florida Supreme Court (FSC) has opined that the $4,000 unused homestead exemption is available if it's not protecting a homestead, so that homeowners may still enjoy up to $8,000 additional wildcard exemptions along with the other $2,000 wildcard exemption. This brings the wildcard to $10,000 -- for married copies filing jointly.)

[nioka]

bcohen,

I came across this article I believe supports your guideline suggestions. It also offers a few others.

http://www.bankruptcysoapbox.com/avoid-hoa-fees-after-bankruptcy/