Debts
What happens to HOA and condo fees when you file bankruptcy?
It depends on when the fees came due. Fees for the period before you filed are ordinary debt that a Chapter 7 discharge can cover. Fees that come due after you file are not discharged in Chapter 7 for as long as you, or the trustee, still have an ownership interest in the unit or lot. If the association has a valid lien on the property, the lien can outlast the discharge.1 2 3 4
Connect to a bankruptcy lawyerYour filing date splits association fees into before and after. What you owed before can be dealt with in the case. What comes due after depends on how long you still own the property.
General information, not legal advice. Rules and amounts change; check with a lawyer or the court before you act.
In this guide
Which fees does this cover?
The rule is about a fee or assessment owed to a membership association for one of these kinds of property: a condominium unit, a share in a cooperative, or a lot in a homeowners association. The rule speaks of a fee or assessment, without separating regular dues from special assessments.1 2
What happens to the fees in Chapter 7?
The date you file draws the line. A Chapter 7 discharge covers debts that arose before the case was filed, and the special rule for association fees says it does not keep fees for a period before the filing out of the discharge.3 2 1
Fees that become due and payable after the filing are different. They are not discharged for as long as you or the trustee has a legal, equitable or possessory ownership interest in the unit, the cooperative share or the lot.1 2
| Fees | What the discharge does | What to watch |
|---|---|---|
| Fees for the period before you filed1 2 3 4 | Your personal liability can be discharged | A valid lien for those fees can remain on the property |
| Fees that come due after you filed, while you still have an ownership interest1 2 | Not discharged | They keep adding up until your ownership interest ends |
What if you plan to give up the home?
This is where people get caught. In Chapter 7 you file a statement of intention saying whether you will keep or surrender property that secures a debt. Saying you will surrender a home does not by itself end your ownership of it.5
The rule for association fees runs for as long as you hold a legal, equitable or possessory ownership interest. Until the property actually passes to someone else, new fees can keep coming due in your name, and those fees are not discharged in Chapter 7.1 2
When your ownership ends depends on state law and on how quickly the lender or the association acts. If you are walking away from a property, ask a lawyer how to limit the gap.
What about a lien for unpaid fees?
A discharge ends your personal liability for a debt. It does not erase a valid lien. A lien that was not removed in the bankruptcy case remains afterward, and the creditor may enforce it against the property.4 6
Whether your association has a lien, and what it can do with one, depends on state law and on the association's governing documents. A lawyer can check both.
What happens in Chapter 13?
Chapter 13 is the chapter for catching up. A plan may provide for curing a default, so fees you had fallen behind on before filing can be paid over the life of the plan, which usually lasts three to five years.7 8
While the case is open, the automatic stay stops most collection actions, including attempts to enforce a lien. That gives the plan room to work.9 10
Fees that come due after filing are a current bill, not a past one. The post-filing fee rule is not one of the debts named on the list of debts that survive a completed Chapter 13 plan, but the Chapter 13 discharge covers debts provided for by the plan. How unpaid post-filing fees are treated at the end of a plan depends on the plan, your state and your court, so get advice before you stop paying them.11 8
If you cannot finish the plan and the court grants a hardship discharge, the debts left out are similar to those left out of a Chapter 7 discharge.4 11
What can change the answer?
The same fee can be treated differently depending on a few facts.
- Whether the association has a valid lien that was not removed in the case.4
Common questions
Does Chapter 7 wipe out the HOA dues I already owe?
Your personal liability for fees from before the filing can be discharged. If the association has a valid lien for those fees, the lien can remain on the property after the case.1 2 3 4
I am surrendering my condo. Do I still owe new dues?
Fees that come due after you file are not discharged in Chapter 7 for as long as you still have a legal, equitable or possessory ownership interest in the unit. Deciding to surrender does not end that interest by itself.1 2
Can I catch up on overdue HOA fees in Chapter 13?
A Chapter 13 plan may provide for curing a default, which lets past-due amounts be paid over the life of the plan.7
Sources
Official courts & government references- 11 U.S. Code § 523(a)(16) (Cornell LII)
- 11 U.S. Code § 301(b) (Cornell LII)
- 11 U.S. Code § 727(b) (Cornell LII)
- Discharge in Bankruptcy - Bankruptcy Basics (uscourts.gov)
- 11 U.S. Code § 521(a)(2) (Cornell LII)
- Chapter 7 - Bankruptcy Basics
- 11 U.S. Code § 1322(b)(3) (Cornell LII)
- Chapter 13 - Bankruptcy Basics (uscourts.gov)
- Glossary of Legal Terms (uscourts.gov)
- 11 U.S. Code § 362(a)(3), (a)(6) (Cornell LII)
- 11 U.S. Code § 1328(a) (Cornell LII)