HOA Fees/Bankruptcy

Started by SusanK5 • 5 replies • 2120 views

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SusanK5 (Utah)
Posts: 30

Posted:

I would like to find out if someone who owes HOA fees files bankruptcy can include their delinquent fees and get out of them. I have read and see where the fees are attached to the land and therefore collectable. I live in a condo in Utah. TNX Susan

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

The bankruptcy discharge eliminates your personal liability for the mortgage, but it does not disturb the lien. Thus, after bankruptcy, the mortgage lender still has its rights in the property, including the right to foreclose if you breach the loan agreement. The HOA falls under this as well.

If you no longer own the house, say it was foreclosed on already, and they include the HOA fees in their bankruptcy, its likely the judge will allow it.

You might want to check with your state laws, there is a slim chance, but it might have something in your favor.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

SusanK,
Steve is right. The bankruptcy policies can be different from one to another, but check state laws (make sure you see up to date stuff). Also, I would believe in most states anyone having a lien on property in foreclosure can ask to be made whole. Of course, it is iffy if you will get it, but the Judge decides. Normally the first mortgage holder, then the second and I beilieve the HOA/condo falls in after that.
One thing for sure, the process by the court will prevail and the party that is delinquent is not going to be the party dictating terms. With the number of foreclosures happening now, I am sure there are lots of folks surprised by the Judges decision about who gets what and who still owes what to who.

SusanK5 (Utah)
Posts: 30

Posted:

Thanks for your replies. I would like to know this from the Board perspective. We have someone who has filed for bankruptcy and is still in their home. Our CC&Rs say that there is an automatic lien for those fees. So even if this person filed are the fees collectable? Thanks again, and I will see what I can find in the state laws.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

SusabK,
Please consider your documents, CC&R's are strictly association documents and are not action documents. No action is generated from these documents unless some kind of motion is generated by the Board or an owner. That is: liens have to be filed, covenants have to be enforced, bills have to be paid, etc, etc.

I say this fully expecting to hear some association has some kind of contract that forces action to be taken by a M/C. Never heard of it, but who knows. Always best not to rely on anything happening automatic in HOA management, even if it does or is supposed to, best to keep tabs and make sure it is done right. The responsibility for everything rests with the Board and the council. The Board is elected so they are first in line, but the owners (members)(council), also personally bear the responsibility and enforcement of the CC$R's.

AnnaD2 (Florida)
Posts: 960

Posted:

We are currently going through this with an owner. We filed a lien for non-payment of maintenance fees in October 2007. The same month the mortgage company filed foreclosure. This dragged on and on until May 2008 when the owner filed for bankruptcy in an attempt to stop the foreclosure. HOWEVER, the bankruptcy judge only allowed him to file for Bankruptcy Chapter 13. This does not forgive his debts but forces a repayment schedule for all past due bills.

Our association is listed as one of the secured creditors to be repaid. The payment plan is for 60 months (five years) so even though he owes the association thousands of dollars we'll only be repaid at the amount of $57.00 per month. (If he's able to even make the payments.) He pays the entire amount due (to everyone)each month to a trustee who then dispurses the payments to the proper creditors.

Now here is the interesting part....federal bankruptcy laws say that once a repayment date is established that all POST bankruptcy condominium or cooperative owner’s association fees must be paid. Meaning that even though he's not paid maintenance fees for months and months he must again START paying them.

This has been a long drawn out process and we've been learning as we go since it's the first time it's happened in our association. This owner has received notice that his maintenance fees once again become due starting June 19, 2009. Our next step is to find out what happens when he defaults on THIS.

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