Condominium and HOA Fees May be Stripped Off in Bankruptcy

One of the primary concerns plaguing anyone living in a condominium or in a community with a homeowner’s association, filing bankruptcy is whether you will be liable for past due association assessments. You may be relieved to learn that the Bankruptcy Code does offer some relief to homeowners owing past due assessments. Depending on the specifics of your case, the fees and assessments levied by your condominium  or homeowner’s association may be stripped in the event that you have become delinquent with your payments.

Conditions that must be met:

In order to strip off past due assessments, you must file a Chapter 13 bankruptcy and the amount owed on your mortgages must exceed the value of your property.  In addition, you must make all payments under your Chapter 13 plan.  If you do not complete your Chapter 13 plan payments before you receive a discharge, all past due assessments that were stripped will be due again.

Your condominium association or homeowner’s association may object to your request to strip the lien and take the position that the value of your home exceeds the outstanding mortgages.  If this occurs you will need to have a hearing and the bankruptcy judge will decide whether the value of your property is less than all of your outstanding mortgages and whether a strip off of the lien for assessments is proper.

Exception to the law:

Assessments that are levied by your condominium or homeowner’s association after the bankruptcy petition is filed are not able to be stripped off.  You still legally owe these assessments to the association and the association can seek payment for any assessments accumulated after your bankruptcy filing.  This is often referred to as “post-petition” debt.

If you have any questions regarding the dismissal of condominium association fees during bankruptcy, or would like to schedule an initial consultation to discuss your specific situation, Kelley Kaplan & Eller invites you to contact our firm of experienced West Palm Beach bankruptcy attorneys today.