Homeowners associations, or HOAs, require members to pay dues each month for the privilege of living in the neighborhood served by the association. If a member defaults on his dues, the HOA may foreclose on the property even if the member is current on his mortgage. The bankruptcy code considers HOA debts to be personal debt as of the date of publication; this debt may or may not be dischargeable, depending on when the fees were incurred.
Responsibility for Dues
As long as you are living in the home, you are responsible for HOA dues. If you fail to pay your dues, you are considered to be in default to your HOA, and you can face consequences such as loss of your home and negative effects on your credit. Thus, HOA debt prior to the date you move out of your home would be considered personal debt for debt collection or bankruptcy purposes.
Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy, your HOA debts may be discharged if you surrender the home to the homeowners' association before filing for bankruptcy. You can still get a discharge on past due HOA debt if you still live in the home. However, you will still be responsible for any HOA debt you incurred after you filed for bankruptcy until you move out or the HOA forecloses on the home.
Warning
Even if you surrender your home to the HOA, you are still responsible for all homeowners association fees until your name is removed from the title of the home. Thus, if you move out after filing bankruptcy, you still may be responsible for post-filing fees if the HOA does not remove your name from the title until the bankruptcy is concluded. If you surrender your home, make sure your name is removed from the title immediately to avoid this problem.
Foreclosure
If the HOA forecloses on your home because you fail to pay homeowners association dues, it sells your home to recoup its losses. As soon as the home is sold, the HOA transfers the title into the new homeowner's name, and you will no longer be responsible for HOA dues. However, the Moak Law Firm warns that if you file for bankruptcy, the HOA may postpone your sale several times, so you may want to keep paying HOA fees if you can until the bankruptcy is processed to ensure that you don't get hit with a big HOA bill at the end of the bankruptcy.
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