Bankruptcy expert Leon Bayer answers real-life questions.
I would like to file for Chapter 7 bankruptcy to get rid of credit card debt and past due home owners association (HOA) dues. I currently live in my home. Can I discharge past due HOA dues in chapter 7 bankruptcy?
The subject of past due HOA dues is tricky for many lawyers and bankruptcy clients, because there is so much misinformation about it.
Here is what you need to know about HOA dues and filing Chapter 7 bankruptcy. As you will see, it makes a big difference whether or not you are keeping the property.
If You Keep Your Home, You Must Pay HOA Dues
If you are going to keep the property, you will have to pay the past due HOA dues. This requirement is no different than paying any past due mortgage payments as a condition of keeping your property. You must also pay all of the future dues and assessments for as long as you own the property.
Your HOA articles are a “covenant running with the land,” which means that it is sort of like a zoning regulation. Everybody in your home owner’s association has to obey the rules. For example, if you buy a piece of property that is zoned only for single family residences, you will be violating the zoning ordinance if you suddenly turn your house into a gas station.
In your case, you bought your home subject to the requirement that you would abide by the terms and conditions contained in the HOA articles. This includes paying all dues and special assessments.
If You Don’t Keep Your Home
Things will turn out somewhat different if you plan to walk away from the property, either by selling it or allowing a foreclosure sale to occur. Here’s what happens to past and future dues:
- You may be able to discharge your past HOA dues in your bankruptcy. (Learn more about the bankruptcy discharge.)
- However, the bankruptcy law specifically provides that HOA dues that accrue after you file for bankruptcy will not be discharged. So, if you continue to own the property after your bankruptcy filing, you will still be liable for ongoing HOA dues. If you don’t pay the dues, the homeowner’s association can collect by: suing you for the money or even foreclosing on your property.
Leon Bayer is a Los Angeles bankruptcy attorney. He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy. The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo. By answering a question on this blog, Mr. Bayer does not become your lawyer.