Are Home Owners Association Dues Dischargeable in Bankruptcy?

Are HOA Dues Dischargeable in Bankruptcy?

It depends on the type of bankruptcy the homeowner filed, chapter 7 liquidation, or a chapter 13 which is a repayment plan.  Also, it may depend on whether the homeowner is keeping the home or surrendering the home in the bankruptcy. Let me explain.

When an individual files bankruptcy they are protected by the an injunction called the automatic stay. The automatic stay immediately stops all debt collections and foreclosure actions against the homeowner, including the HOA’s attempts to collect unpaid fees /dues. So far so good.

However, if the HOA has placed a lien against the property before the bankruptcy was filed then some courts have ruled the lien should not be discharged because it’s a ‘secured’ debt, in which the home is a guarantee for repayment of the lien, treated much like a mortgage.  If the homeowner filed under chapter 13, it may be possible to strip the lien to the extent it is unsecured by the equity in the home, and/or the homeowner may be required to make payments under the chapter 13 plan.

Some Bankruptcy Courts have held that a debtor is liable for post-petition assessments, meaning, assessments that come due during the bankruptcy are collectible, unless the debtor surrenders the property to the Bankruptcy Estate.  It may even be possible to prorate HOA dues from post petition to the point where the title changes.

In summary the issue of discharging HOA dues is more complicated than at first glance and as with many things the devil is in the details and how your specific court treats the issue.