To Pay Or Not To Pay Post HOA Fees.

[nioka]

In several posts here at BK forum this topic gets mixed results. Many recommend paying the post HOA fees while others do not.

I have finally filed chapter 7 and I was surprised when my attorney told me not to pay the post HOA fees. He explained it all in legal terms much of which went over my head. He concluded the HOA fee topic by saying that paying post HOA fees would be like throwing money into the waste can for me. He said unless I wanted to reestablish my HOA membership privileges there would be no benefit to me to pay them.

To pay or not to pay seems to come down to each individual case with regards to state law, county law, assets, financial status, surrendering or reaffirming the house, etc. One thing for sure, no one size fits all.
In my case, I am surrendering the property. I have no assets and my income is protected. Please note it makes little difference to me if the HOA or the bank forecloses. (I realize that many would like to stay in their homes as long as possible but I am ready to move on).

I came across the article below that I thought provides a different prospective on the subject.

http://www.wgandf-law.com/Articles/Post-Petition-HOA-Fees-in-Bankruptcy.shtml

[LadyInTheRed]

I think you should follow your attorney's advice over the advice of a bunch of strangers on the internet.

[bcohen]

If you were planning to keep the house, then you would have to keep your HOA dues current after discharge (as well as pay off any arrearages for which you were sued and a lien was placed upon the house). Since you are planning to surrender the house, it's not clear you would gain anything by paying the HOA. If they place a lien upon the house, that isn't really your problem because whoever ultimately purchases it when the bank forecloses will need to pay off the HOA in order to obtain clear title.

[nioka]

LITR,

I agree. I retained my attorney this week and will follow his advice.
However, I find this subject interesting and because of previous controversy I thought I would present this link.

bcohen,

It sounds like my attorney agrees with you.


I also found another article but was unable to cut & paste it. The article was written by a real estate broker.
'Recent actions of banks on foreclosures in HOAs indicate they are willing to delay foreclosure allowing the HOA to foreclose. When the HOA forecloses it assumes all responsibilities for that property thereby releasing a debtor who usually is unable to pay the bills. The bank is then able to collect the monthly mortgage payment from the HOA.'

I found this very interesting in that the main goal of bankruptcy was and is intended to give the bankrupt individual a fresh start with a clean slate.

[nioka]

After reading other posts here at BK Forum I find many posters here still have their homes in their names for years and even after five years and more even though they have surrendered those homes. Yet some of these folks who are in HOAs recommend paying post HOA fees.
If they truly wanted to unload the property why not let and encourage the HOA to foreclose? The best way to do that is simply to not pay the HOA assessments.

[despritfreya]

I was going to do quite a dissertation on this subject but my time is limited. I may come back to this thread when I have an extended period of time to address this but. . .

HOA dues, fees, assessments that are incurred from the moment the Chapter 7 is filed until the moment the title to the property changes ARE the responsibility of the debtor based upon 11 USC 523(a)(16). In MOST states that responsibity for what I am calling the "gap" IS NOT eliminated when the property is foreclosed. In MOST states (including AZ - shame on that web site you linked for misleading folks in AZ) the HOA is junior to a first mortgage holder and, as a result, the lien, just like any other junior lien, is wiped out upon foreclosure by the lender, only to attach to any excess proceeds there may be as a result of the foreclosure. The extinguishment of the lien, unless paid in full by excess proceeds, DOES NOT eliminate the debtor's liability for post petition - pre foreclosure fees/dues/assessments. The HOA has the right and many time exercises that right to sue to collect the post petition - pre foreclosure fees/dues/assessments.

Go back to the bk attny and have him/her put in writing that he/she guarantees you will not be sued for the "gap" liability. Bet he/she won't and I will bet with such a request from you, he/she will change the advice and recommend that you continue to pay the HOA.

Des

[LadyInTheRed]

I was going to do quite a dissertation on this subject but my time is limited. I may come back to this thread when I have an extended period of time to address this but. . .

HOA dues, fees, assessments that are incurred from the moment the Chapter 7 is filed until the moment the title to the property changes ARE the responsibility of the debtor based upon 11 USC 523(a)(16). In MOST states that responsibity for what I am calling the "gap" IS NOT eliminated when the property is foreclosed. In MOST states (including AZ - shame on that web site you linked for misleading folks in AZ) the HOA is junior to a first mortgage holder and, as a result, the lien, just like any other junior lien, is wiped out upon foreclosure by the lender, only to attach to any excess proceeds there may be as a result of the foreclosure. The extinguishment of the lien, unless paid in full by excess proceeds, DOES NOT eliminate the debtor's liability for post petition - pre foreclosure fees/dues/assessments. The HOA has the right and many time exercises that right to sue to collect the post petition - pre foreclosure fees/dues/assessments.

Go back to the bk attny and have him/her put in writing that he/she guarantees you will not be sued for the "gap" liability. Bet he/she won't and I will bet with such a request from you, he/she will change the advice and recommend that you continue to pay the HOA.

Des

Des is the one "stranger" on the internet whose advice I would take very seriously, even if inconsistent with the advice of my own attorney.

Your HOA fee is only $100 a month, right? If after going back to your attorney, you are still in doubt, that seems a low amount to pay to make sure you aren't haunted later by the HOA trying to collect.

[nioka]

LITR,

I had posted a thread, Opinions Wanted, and only got one response that was against paying the HOA fees. This was earlier in March when I tried to settle with the HOA. They refused but did give me an option to pay on time. I did entertain this option but no one responded and thought that this was not a good option.
I agree, as I have before, paying $100 HOA fees is cheap rent and is worth the price to avoid future issues. It sure does not make sense to battle on two fronts if it is not necessary.
I also mentioned that I probably would pay the HOA going forward depending on how the HOA treats the past HOA fees after I file.
Upon filing my attorney instructed me not to pay because there is nothing the HOA can do to collect from me other than foreclose. I want foreclosure and whether it is the HOA or bank it makes no difference. Actually because my bank has a history of dragging it's feet getting the HOA involved may speed things up.

Since that post the HOA has become far more aggressive. Almost every day I get regular or certified mail and emails. Last night they sent a security guard by my house to hand deliver another letter all with the same message. All this after they said I had until March 31st before they take action.
My direct experience with my HOA showed me that they will do whatever it takes to cover for each other. When presented with disputable evidence the HOA board turned a blind eye in favor of their own employee. This HOA cannot be trusted.
By the time April's HOA statement is available the HOA will surely have been notified of my filing chapter 7. It will be interesting to see how they bill for April.

I have talked to three attorneys here in regard to bankruptcy. I spoke with another one in regards to suing the HOA. All but one told me not to pay the HOA fees.

One thing that des said I wonder about is
"that responsibity for what I am calling the "gap" IS NOT eliminated when the property is foreclosed."
If the HOA files a lien for non payment and then forecloses for that same lien and is successful in that foreclosure takes the property how can they hold the homeowner liable for the same costs? The lien is satisfied with the foreclosure.

[despritfreya]

Your attny indicated that there is nothing the HOA can do to collect but to foreclose. This must mean that your only source of income is social security which is protected from garnishment. If you have absolutely nothing a creditor (any creditor) can get their grubby hands on then your attny is correct and paying the HOA may make little sense. But, if you are not judgment proof (collection proof as some would call it) then taking the risk in not paying makes little sense.

As to the lien issue if foreclosed, my comment deals with a senior lender foreclosing, not the HOA which would be junior and, unless there are proceeds available over what was owed to the foreclosing lender and its associated costs, the HOA would still be owed 100% - now as an unsecured creditor.

As to a foreclosure by the HOA, I would imagine that the ability to assert some sort of deficiency claim against the debtor turns on 1) whether or not the property sold to a 3rd party which, if it did, probably paid the HOA in full and 2) state law as it relates to the ability to claim a deficiency if the completion of the foreclosure did not net enough $$ to pay the HOA in full. (Hope this makes sense)

Des.

[nioka]

Des,

Thanks for the post. Yes, my situation is no assets, SS income and a small ERISA pension. Every attorney I talked to all said I am judgement proof, bullet, proof, or words to that effect.

However, it is the ethics of my situation that troubles me. I continue to pay the water and electric bill and I believe HOA fees have a similar duty to be paid. I have no problem paying the HOA fees going forward but this HOA I am in has proven themselves to be underhanded at the very least. I suspect than any show of weakness on my part will result in an assault by the HOA and an attempt to recover the pre HOA fees.
(I should mention that the pre HOA fees contain a felonious fine that far exceeds the actual fees/dues).

[LadyInTheRed]

If your pre-petition fees are discharged and the HOA tries to collect them, you can sue them for violation of the permanent injunction against attempting to collect a discharged debt. I wouldn't let the possibility of them trying to collect a discharged debt be a factor in your decision whether to pay the post-petition fees.

[justbroke]

Exactly LITR, exactly. Some HOAs and even their real-estate attorneys do not understand the power of the permanent discharge injunction. Smarts HOAs would, immediately upon learning that you filed for bankruptcy, create a NEW HOA account to track the post-petition dues while being able to account for, accrue interest, and manage the pre-petition HOA account. Did I mention that not all HOAs are smart?

Specifically for the reasons that despritfreya wrote and that I already understood, I would always pay post-petition HOA dues just to avoid the headache and potential personal liability! Especially where, in my case, the HOA dues amount to less than $30 a month (since the majority of our HOA assessments are actually taxed as non ad-valorem property taxes).

[mijd]

Nioka, I commend you for your ethics. Some people don't realize that the community as a whole depends on dues paid by each and every homeowner. I was in a similar situation as yours. I stopped paying my mortgage (lawyers advice) hoping for a loan modification and ended up with a short sale. All this time I paid my HOA dues as I knew the community relied on dues to pay for upkeep on common areas, roads, etc. This also prevented a lot of problems. I was also fortunate enough to have income to pay them.
You mentioned you don't trust your HOA board. This is more common than you imagine. I sat on a board for over 3 years and received threats from more than one homeowner. The fact is, the community elects the board and can also vote them out of office. The board has an obligation to keep the communities interest first and foremost over their own personal interests... which sometimes does not happen. But by suing an HOA, the board has to use HOA $ to defend the HOA. So in reality, they are suing themselves.
I wish you the best of luck with your future and I hope you find your answer. It's obvious you're passionate about this subject as you have chosen to discuss it twice.