The Short Answer
Whether you have to pay HOA dues after filing bankruptcy depends on one thing: whether you still own the home. If you're keeping the home, you must continue paying dues. If you're surrendering the home, you're still legally responsible for HOA dues, fines, and assessments from the date of filing until the property title transfers out of your name — which can take months or even years if the mortgage company delays foreclosure. Filing bankruptcy wipes out any HOA debt that existed before you filed, but it does not eliminate post-filing obligations while the home remains in your name.
It all depends. If you are filing a bankruptcy in which you wish to keep the home, you are required to continue to pay your homeowner’s association (HOA) dues.
If you are surrendering or giving up the home in the bankruptcy, you are responsible for the HOA dues as long as the home is still titled in your name. In the bankruptcy code, the federal law, Section 11 USC 523(a)16, states the legal homeowner is responsible to pay HOA dues, fines, and assessments. This is an issue that is becoming very problematic. The good news is when you file the bankruptcy any homeowner’s association (HOA) fees owed up until the time of the bankruptcy filing are eliminated. The problem is this relatively unknown law in the bankruptcy code. Most bankruptcy lawyers agree it is not a fair law but, nevertheless, it still exists.
This law states any HOA dues, fees, assessments, attorney’s fees, or fines incurred after the bankruptcy filing is the responsibility of the registered owner of the property. You are probably thinking that is all right, I gave up the house in the bankruptcy. The potential problem is many times the mortgage company “drags their feet” after you filed the bankruptcy and does not immediately foreclose on the property. It could be many months or even years before they foreclose and the home is sold at a foreclosure sale. Until the mortgage company forecloses and sales the property at a foreclosure sale, you are still the legal owner of the home and property. Therefore, you are still responsible to pay the HOA dues and any fines assessed until the home is sold at the foreclosure sale and you are no longer the legal owner.
You will need to be concerned, especially during the summer months, about mowing the loan, trimming hedges, etc. When you move out of the house, and the grass becomes high, the HOA will send you, as the legal owner, a notice to mow the grass. The HOA may threaten to fine you $50 per day for each day the grass is not cut. The HOA can sue you if you do not mow the grass, etc., and collect the $50 per day fine. Again, we agree this is not fair, but this is the law!
Contrary to popular belief, your neighbors on the HOA committee or board have immense power and can sue you if you do not pay your homeowners association’s dues. In limited situations they can even foreclose on your home if you do not pay the HOA dues and fines. However, at this time, some states are trying to enact laws that forbids HOA from foreclosing on a home for nonpayment of HOA dues and fees.
If you are deciding to give up the home in the bankruptcy, you may want to consider staying in the home until the actual foreclosure sale. This could be months after you “give up” the house in the bankruptcy. You can live there rent free, but be prepared to move out with a few days notice. While you live in the home, you must maintain the lawn, etc., to keep the HOA happy. You are still responsible to pay the HOA dues until the house is sold at a foreclosure sale and the legal title is changed to someone other than you.
Another option is to talk to the mortgage company and do a short sale on the home before you file the bankruptcy. Then you are no longer the legal owner of the home and we can eliminate any deficiency balance owed to the mortgage company in the bankruptcy.
Another very good option is to do a deed in lieu of foreclosure and deed the property over to the mortgage company before or after you file the bankruptcy. Check with an attorney before you do this. There could be legal ramifications for “deeding” the home shortly before you file a bankruptcy. You must receive court approval to sell or deed the home during the bankruptcy proceedings.
The bottom line: Until you are no longer the legal owner of the property that you gave up in the bankruptcy, your homeowner’s association can still come after you for fees and penalties incurred during your ownership and after the filing of your bankruptcy.
Key Takeaways
- HOA dues owed before your bankruptcy filing can be discharged, but any dues, fines, or assessments that accrue after filing remain your responsibility as long as the home is titled in your name.
- If you surrender your home in bankruptcy, you are still the legal owner until the foreclosure sale is completed — and that process can drag on for months or years.
- During that waiting period, you must maintain the property, including mowing the lawn, or the HOA can fine you and even sue you to collect those penalties.
- One practical option is to remain in the home rent-free until the actual foreclosure sale, which eliminates the maintenance problem and keeps you in compliance with HOA rules.
- A deed in lieu of foreclosure or a short sale before filing can remove your name from the title sooner, but you must get court approval if the bankruptcy is already underway.
- Under 11 U.S.C. § 523(a)(16), HOA dues and assessments incurred post-filing are not dischargeable, making this one of the most overlooked financial risks in surrender cases.
Attorney Insight
The mistake I see most often is clients who surrender their home in bankruptcy and assume they're immediately done with it — then get blindsided six months later by an HOA threatening to sue them over unpaid dues and a $50-a-day lawn fine. In North Carolina, mortgage servicers routinely take a year or longer to complete a foreclosure, and during every one of those months, my client is still the legal owner on the deed. I always tell clients who are surrendering a home in an HOA neighborhood: either stay in the house and maintain it until the foreclosure sale, or actively push for a deed in lieu or short sale — because ignoring the property while your name is still on the title is a trap that catches people off guard every single time.
