Can I Discharge HOA Dues in Chapter 7 Bankruptcy?

What happens to HOA dues in Chapter 7 bankruptcy depends on whether you plan to keep or surrender your home.

You might be able to discharge (wipe out) homeowner’s association (HOA) dues if you file for Chapter 7 bankruptcy. The HOA dues will be discharged up to the date that you file if you give up your home or condo in the bankruptcy.

However, if you intend to keep your home or condominium, you’ll probably have to keep paying the dues to keep the property. And even if you do give up your home, you won't be able to discharge any HOA fees that accrue after you file for Chapter 7 bankruptcy.

(Not sure whether Chapter 7 or 13 bankruptcy is best for you? Start by reading What Are the Differences Between Chapter 7 and Chapter 13 Bankruptcy?)

Giving Up Your Home or Condo in Bankruptcy

If you don’t want your real estate for any reason, you can surrender it in a Chapter 7 bankruptcy. You let the court and your creditor know when you fill out the official bankruptcy forms. Specifically, you’ll indicate your choice on the Statement of Intention for Individuals Filing Under Chapter 7 Bankruptcy.

By surrendering your home or condo in Chapter 7 bankruptcy, you might be able to discharge all of the debts associated with the property, including the HOA fees.

(Find out about Completing the Statement of Intention for Individuals Filing Under Chapter 7 Bankruptcy.)

Post-Bankruptcy HOA Fees: Watch Out

The HOA fees that you’ll be able to discharge in your case include those that accrued up to the date of filing bankruptcy. Any additional fees that accrue after you file for bankruptcy, like other post-bankruptcy debts, will not be discharged.

Why might this be a problem?

Even if you surrender your home in bankruptcy, new HOA fees will continue to accrue while you wait for the bank to foreclose. Just like your property tax, you’ll remain responsible for the HOA fees until the title changes from you to the bank.

If the homeowner's association isn’t paid for the fees out of the proceeds of the sale of the property or if the association doesn’t want to wait for payment, it might be able to sue you personally for any post-bankruptcy HOA fees assessed to you while you were on the title.

Options for Dealing With Post-Bankruptcy HOA Fees

If you don't want to worry about post-petition HOA fees, consider other options:

  • Try to sell the property as a short sale, rather than wait for the mortgage lender to foreclose.
  • Wait to file for Chapter 7 bankruptcy until after the bank takes the home in foreclosure.

Keep in mind that both of these options can result in substantial tax debt. Before pursuing any course of action, you should consult with your accountant or a tax attorney. To learn more about foreclosures and short sales, see Foreclosure.

HOA Fees If You Keep Your Home or Condo

If you intend to keep your home in a Chapter 7 bankruptcy, then you should probably treat the HOA as you would any other bank holding a mortgage on the property and plan to pay HOA dues that are owed before and after you file bankruptcy. Even if your liability for past dues gets discharged, the HOA could foreclose on your home if the HOA has a lien on your home for the dues. (Find out more in What Happens to Liens in Chapter 7 Bankruptcy?)

Avoiding HOA Late Fees, Attorney Fees, and Other Charges

Falling behind on HOA fees comes at a cost because the HOA will assess late charges and, in many cases, attorney fees—and they could exceed the balance of the HOA assessments and dues.

You’ll want to check your state laws because they vary on whether the HOA can collect attorney fees and other charges from you. As a general rule, if the HOA by-laws or articles allow attorney fees, late fees, and other charges, then you’ll be on the hook for those amounts.

Your state's statutes might also give the HOA authority to charge you these fees. But that does not mean this right is open-ended. Usually, HOA attorney fees must be “reasonable.” If you believe that the HOA's lawyers are charging you excessive, inaccurate, unfair, or otherwise unreasonable attorney fees, consult with a local attorney or raise this as a defense to any foreclosure collection lawsuit that the HOA files against you.

(See, Your Home in Chapter 7 Bankruptcy, for more.)

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