Paying your HOA fees can be a financial stressor for those who are already behind on their mortgage, car payments, or other bills. If you are considering bankruptcy, it is important to understand what will happen to HOA fees in Indiana once your filing is complete.
HOA fees are treated differently from many other debts
Various forms of debt are dischargeable in bankruptcy. This includes credit card debts, medical debts, and even debts backed by collateral such as mortgages and car payments. HOA fees differ because they are linked to the property itself rather than to a contract.
In most cases, HOA assessments owed prior to your bankruptcy filing can be discharged, depending on the individual case and the chapter of bankruptcy filed. Nevertheless, filing for bankruptcy will not necessarily discharge the obligation to pay HOA fees due after the bankruptcy has been filed if you are still the owner of the property.
Most homeowners do not understand this aspect when they decide to vacate the premises.
Why ownership matters
The critical question, then, is who owns the property. While your name still appears on the title, your Homeowners’ Association will still be able to make you pay dues even though:
- You no longer reside at the address
- The property is under foreclosure
- You told the bank that you would like to give up the property
It often takes months (sometimes years) from the time you file for bankruptcy until the bank completes the foreclosure process.
Chapter 7 versus Chapter 13
Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, your approach to HOA fees is the same with respect to ownership.
Chapter 7 bankruptcy might discharge any liability that the filer has for eligible HOA fees incurred prior to filing for bankruptcy. However, the post-petition fees would remain your liabilities until ownership has been transferred.
In Chapter 13 bankruptcy, there are other ways to deal with mortgage delinquency or foreclosure issues, depending on the situation. In certain cases, filing a Chapter 13 bankruptcy can be advantageous if the homeowner wants to retain the property. They must, however, be current on their HOA dues.
Planning ahead can make a difference
Since the obligation can survive even after bankruptcy, proper planning is required to secure a positive financial outcome. It can depend on the type of bankruptcy case you file, whether there is a foreclosure process, and your plans for the property.
A professional bankruptcy lawyer will be able to give you advice about the application of Indiana bankruptcy laws to your particular case.
Contact a Danville, IN, Bankruptcy Lawyer Today
Chris Arrington represents the interests of Danville residents who need to file for bankruptcy. Call our office today to schedule an appointment, and we can begin discussing your financial needs right away