We hear this question a lot from clients who live in condominiums or communities that require the homeowner to be a part of a home owners association (HOA) to share communal maintenance fees. And if they don’t ask we let them know anyway.

Unfortunately, the answer is yes.

HOA fees are fees that arise from a contract between the homeowner and the HOA. Under the bankruptcy code HOA fees that accrue after you file for bankruptcy are the responsibility of the homeowner.

As came to head through Huntley v. Snyder (.PDF), the code [11 USC 523(a)16] excepts from discharge:

Any debt for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot.
 

What this means for you?

You will be responsible for HOA fees from the time between filing your discharge and when your lender actually forecloses on your home, as you remain the legal owner until foreclosure or some other transfer of title occurs (i.e. short sale or deed in lieu).

You are probably now wondering, well, how long will that take?

Sadly, only your lender knows for sure. Depending on how far into the foreclosure process you are when you file and when the lender can get around to setting a foreclosure date it can be a matter of weeks, months, or even a year. I have had more than one client whose home did not sell at foreclosure until a year after the bankruptcy was filed.

 
Anything else?

The good news is you can remain in your home without having to pay a mortgage until the foreclosure takes place, so HOA fees are a relatively small price to pay. Additionally, HOAs are sometimes willing to negotiate a settlement of the amount of fees due, however that is more likely when you actually move out of the home.
 

So, what are some solutions to dealing with these post-filing HOA fees?

1. File the bankruptcy after foreclosure takes place
2. Pay the HOA fees as they come due
3. Try to negotiate a short-sale or deed-in-lieu with your lender before foreclosure takes place as the HOA fees will have to be taken care of as part of the negotiation
4. Save up money to the best of your ability, and be prepared to pay the fees if/when the HOA attempts to collect.