Should I pay my homeowner association dues if I surrender my home in bankruptcy?

29 Nov Should I pay my homeowner association dues if I surrender my home in bankruptcy?

Even if you surrender your home in bankruptcy, you are still liable for your homeowner’s or condominium owner’s association dues that become due after the date of filing.

As a general rule, all the debt that you owe on the day you file your bankruptcy is discharged, including past-due HOA and COA dues. However, because you remain the deed-title owner of your real property until your lender takes the property back, you owe current dues and assessments going forward.

But this doesn’t answer the question, “Should I pay?” Well, the answer depends on your plan, but one thing is for sure. You should pay your HOA and COA dues if you continue to live in the home or if you continue to rent out your rental property.

Fighting your Foreclosure after bankruptcy:

If you intend to fight your lender in the state court foreclosure case, the association can undercut your efforts by initiating its own foreclosure. An HOA foreclosure is much harder to defend than a bank foreclosure because the elements of proof are easier to prove. Essentially, an association only has to prove that (1) assessed dues are unpaid, (2) it gave the homeowner notice of the delinquency and (3) the dues remain unpaid.

If your lender is ultimately successful in the foreclosure case and forces a sheriff’s sale of your home, the HOA will get paid, with some limitation. In the Sunshine State, for example, Florida Statute § 720.3085(2)(c) limits the association’s recovery from the sale proceeds to the lesser of 12 months of delinquent assessment or 1% of the balance owed on the property.

So, if you are able to fight your foreclosure for years after bankruptcy, you may still owe money to the HOA because they are limited in their recovery from the foreclosure sale. On the other hand, if the bank takes less than a year after your bankruptcy filing date to foreclose, the probability is great that the post-petition assessments will get paid from the proceeds of the sale.

Short sale after bankruptcy:

If you intend to short sell your property, the buyer of your home becomes ultimately liable for homeowner or condo association dues and assessments. Even though this becomes a point of contention with all the parties at the table – buyer, first mortgage lender, second mortgage lender, association – the one who cares the least is YOU because you filed bankruptcy. Everyone wants to get the short sale done, and everyone knows that you have wiped out you financial liability in this transaction.

So, these parties will hash it out, and you shouldn’t have to pull a nickel out of your pocket, even if the assessments are post-petition.

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Chip Parker is the managing partner of Parker & DuFresne, P.A., where he represents Northeast Florida businesses and consumers facing bankruptcy, and homeowners facing foreclosure. His firm files more homeowners in the Mortgage Modification Mediation Program than any other law firm in Northeast Florida. Parker is the recipient of Jacksonville Area Legal Aid's prestigious Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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