Home Owner’s Associations (HOA), Foreclosure and Bankruptcy Experience
Generally speaking HOA fees should not be left unpaid, especially if you continue to live in or rent the dwelling in question. The debt that you owe on the day you file your bankruptcy is discharged, including past-due HOA and COA dues. But until the bank takes your property back in foreclosure, or a new owner is on title you will still owe all HOA or COA fees in the future. HOA’s can file their own foreclosure petitions separate and apart from those filed by a general lender, and their burden of proof is much easier to meet. You have either paid your HOA fees or you haven’t!
A Home Owner’s Association can file its own foreclosure. An HOA foreclosure is much harder to defend than a bank foreclosure because the elements of proof are easier to prove. Essentially, an association only has to prove that (1) assessed dues are unpaid, (2) it gave the homeowner notice of the delinquency and (3) the dues remain unpaid. If you file for bankruptcy and your home is also subsequently foreclosed upon, know that in the state of Florida an HOA will recover up to 12 months of delinquent dues or 1% of the outstanding amount owed on the property, whichever is less. If you can forestall the foreclosure process subsequent to a bankruptcy filing, the monetary recovery for an HOA is different. You can conceivably continue to owe the HOA! The foreclosure SALE was the limiting factor and that has now been removed. But if the bank takes less than a year after your bankruptcy filing date to foreclose, the probability is great that the post-petition assessments will get paid from the proceeds of the sale.
A third scenario involves short sales. A short sale involves selling a property for less than is owed on all outstanding mortgages. If a short sale is approved, the buyer will usually become the responsible party for any outstanding HOA fees and assessments. Short sales, in effect, remove your financial obligation to said property. So in essence this is probably the best option if you are trying to decide whether to try and short-sale your home or letting it go into foreclosure and you have a possible bankruptcy case that you may need to file.
As always, Carmen G. Soto, PA, can assist you when deciding which path is best for you.
What if you don’t have enough cash on hand to fully pay attorney fees and bankruptcy costs? Lawyers who are amenable to the idea can accept periodic payments while they are preparing bankruptcy paper work. Once payments have been made in full, the actual bankruptcy petition will then be filed. You must make the decision as to whether you have the time to wait before such Chapter 7 filings take place.
“Payment plans” and Chapter 7 bankruptcies do not usually go together. Generally speaking, all fees are supposed to be paid prior to the filing of a Chapter 7 bankruptcy because, once the Chapter 7 paperwork is filed, automatic stays issue preventing the collection of any pre-existing debts.
The Law Office of Carmen G. Soto, PA accepts payment plans. We work with your particular financial circumstances and provide a payment schedule. Once the payments are made we can file your case and begin the bankruptcy process.