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What Happens to HOA Dues in Bankruptcy?

Washington dc bankruptcy attorney The economic downturn affected the residential real estate market a great deal.  Housing prices declined drastically leaving some homeowners with under water mortgages.  As a result, a good percentage of bankruptcies were filed to eliminate mortgage and homeowners association (HOA) debts.  A good percentage of bankruptcies filed in Maryland and Washington D.C. area were due to declining home prices.

It is common knowledge that a mortgage debt could be eliminated in a bankruptcy proceeding. However, the answer to whether a bankruptcy proceeding eliminates HOA fees is a bit more complex and it depends on several factors.  This article explains what happens to HOA dues in bankruptcy.

Congress amended the bankruptcy code in 2005 by enacting the Bankruptcy Abuse and Prevention Act (BAPCPA).  BAPCPA changed how HOA dues are treated in a chapter 7 bankruptcy proceeding.

BAPCPA made post-petition condominium and homeowners association assessments non-dischargeable (unable to eliminate) in a Chapter 7 bankruptcy proceeding. Under the amended provision, a person continues to incur post-petition liability over HOA fees during the “legal, equitable, or possessory ownership of such unit,”  this means that a person continues to incur post-petition liability over the HOA fees until legal tittle changes from the person to someone else.

The following are the most common scenarios dealing with HOA fees in bankruptcy and describe what happens to HOA dues in bankruptcy.

Scenario 1: You file bankruptcy to eliminate mortgage debt and unpaid HOA fees, and you surrender you home in the bankruptcy proceeding and move out of the home.


Under this scenario, you are able to discharge your personal liability over the mortgage and also completely discharge HOA dues owed before the bankruptcy filing.  However, because of the 2005 amendments you are still liable for any HOA fees assessed between the bankruptcy filing date and the foreclosure date. Thus, even if you no longer live in the home and after the bankruptcy case ends, you have to pay the HOA fees and stay current until the bank forecloses on the home.

If you don’t stay current, then you will owe those post-bankruptcy HOA fees and the HOA could obtain a judgment against you for the new (post-bankruptcy) HOA fees, interests, and attorney fees. With that judgment the HOA could garnish your wages or take personal actions against you. This new HOA debt will NOT be covered by the bankruptcy discharge.

Scenario 2: You file for bankruptcy to eliminate other debts and also to eliminate your personal liability over the mortgage and overdue HOA fees, but would like to keep the home and continue to pay the mortgage after the bankruptcy.

In this scenario, your personal liability over the mortgage is discharged, meaning that you could at any time walk away from the mortgage and don’t have to worry about being personally sued by the bank. The bank will not garnish your wages or obtain any type of judgment against you.

Your personal liability over the pre-bankruptcy HOA fees will also be eliminated, thus if you decide to walk away from the property then the HOA cannot sue you personally for the pre-bankruptcy HOA fees.

However, since you plan on keeping the home and plan to keep paying your mortgage, then you have to pay your pre-bankruptcy and post-bankruptcy HOA dues.  Even though your personal liability over the pre-bankruptcy HOA dues has been eliminated, you still have to pay your pre-bankruptcy HOA dues because the HOA likely recorded liens over your home for the amount of HOA dues owed and could foreclose on the home it if you don’t pay the past HOA fees.  Liens are a type of debt that survives the bankruptcy process.

In summary, if you plan to keep the home, then also plan having enough money available to pay past HOA fees and to stay current on present HOA fees.

Scenario 3:  You filed for bankruptcy and you discharge your mortgage debt and surrender the home in the bankruptcy proceeding, but continue to live in the home while you wait for the bank to foreclose.


In this scenario like scenario number 1 and 2, you discharge your personal liability over the mortgage and pre-bankruptcy HOA fees. Unlike scenario 2, you do not want keep the home so you do not have to pay any pre-bankruptcy HOA fees. However, you do have to stay current on post-bankruptcy HOA dues while you are waiting for the bank to foreclose. If you do not stay current then you will be personally liable for the post-bankruptcy HOA fees.

Keep in mind that banks are taking months if not years to foreclose on a home in Maryland, Washington D.C., and other states, thus the post-bankruptcy HOA liability could be a large sum.  Staying current in your post-bankruptcy HOA dues is a good way to stay debt free after bankruptcy and in route to financial recovery. 


I hope that this article sheds some light to what happens to HOA dues in bankruptcy.  Speak to an experienced Maryland and Washington D.C. Bankruptcy attorney before filing for bankruptcy.  A bankruptcy attorney will advice you if bankruptcy is a good option for you depending on your individual circumstances. If you own a home in Washington D.C. or Maryland then speak to a bankruptcy attorney who could guide you on what happens to HOA fees in bankruptcy.

Washington D.C. bankruptcy attorney could give you advice on the effect that filing for bankruptcy will have on the HOA fees you owe.  Ready learn more about the bankruptcy process?  Call 202-445-4775 or contact us for a consultation.