Resolving Past Due Condo Association & Homeowner Association (HOA) Dues and Fees
Past due condominium association or HOA fees can quickly become a headache. Late fees, penalties and collection costs combined can snowball the debt. Don’t wait until your condo association begins foreclosure proceedings, deal with the debt and put an end to the added fees.
Our firm specializes in debt resolution and foreclosure prevention. Call today at 866-261-8282 for a free consultation with a licensed Michigan attorney to discuss your best course of action. We are a Michigan based firm with six convenient locations throughout the state: Detroit, Ann Arbor, Dearborn, Flint, Southfield and Warren.
Options for Handling Past Due Condo Association & HOA Dues and Fees
Here is an overview of available options to resolve past due association fees and dues:
- Structure repayment terms with the Condo Board to pay the past due balance: If you have the available funds and it doesn’t jeopardize your budget or financial future (i.e. borrowing from retirement to pay current debts);
- Try to negotiate a reduction in what you owe through a short sale, etc. Negotiating a reduction may still create a deficiency balance and/or create tax liabilities;
- File a Chapter 13 debt consolidation plan to keep your condo, achieve optimal repayment terms and possibly reduce the liability;
- File a Chapter 7 bankruptcy to surrender the condo and eliminate further financial liability as well as other unwanted unsecured debts such as credit cards or medical bills.
We will help you evaluate the best choice for your circumstances at the time of the free consultation.
Consolidate Condo Association Arrearages through a Chapter 13 Reorganization Plan
Chapter 13 bankruptcy is a debt consolidation plan designed to help you:
- Prioritize your debts;
- Eliminate debts that you cannot reasonably afford to pay throughout the course of the Chapter 13 plan, likely fees to be eliminated include your condo dues arrearages or a second mortgage;
- Obtain protection from creditor actions, such as a repossession or garnishment;
- Build credit by consistently maintaining payments and a reduced debt-to-income ratio.
How are Condo Dues & HOA Arrearages Handled in a Chapter 13 Plan?
If you are planning to keep your condo, then there are two scenarios:
- The pre-petition dues would be treated as unsecured debt (and potentially eliminated) if the value of the property is less than the first mortgage balance or;
- As a secured claim to be paid at 0% interest over the term of the plan (36 – 60 months) if there is equity over the amount owed on first mortgage.
In either scenario, the ongoing assessments will be paid in full each month to the association via the Chapter 13 plan. The program allows you reduce and defer other debts/bills to bring your budget back in balance each month.
In sum, the Chapter 13 reorganization plan is an effective way to stop an association from collecting via a lawsuit and/or foreclosure. Often, the arrearages can be converted to unsecured debt and then “lien stripped” while getting you back on track with the ongoing, post-petition assessments.
If you intend to surrender your condo under a Chapter 13 plan, the pre-petition association dues would be treated as an unsecured claim and would be paid pro rata with other unsecured creditors (and possibly eliminated altogether). The post-petition association dues (dues accrued after the filing of the Chapter 13), dues that continue through the expiration of the redemption period (typically 6 months), would be personally collectible against the debtor despite the bankruptcy. Courts have ruled that these are post-petition debts that must be paid. Therefore your Chapter 13 budget should account for an expense or payment of these dues in order to avoid a liability after plan completion.
Eliminating Pre-Filing Condo Association & HOA Debt through Chapter 7 Fresh Start Program
By filing a Chapter 7 bankruptcy, your personal liabilities for any pre-filing condo association dues are legally discharged. However, the property lien survives the filing so if you intend to keep the property, you will need to pay the association dues to avoid a foreclosure by the association.
The United States Bankruptcy Code (11 USC 523(a)(16) renders all post-filing association dues non-dischargeable. As such, regardless of the filing of a Chapter 7, you will be personally responsible for any association dues that come due after the case is filed until the expiration of redemption period (or until you vacate the premises and the bank has taken control of the property). Because it may take a lender years to
foreclose; it is critical to understand that despite the filing of a Chapter 7 bankruptcy and an intention to “surrender” your property, you will still be responsible for association dues that accrue after the case is filed through the expiration of redemption (or until the bank has taken control of the property).
Trust Our Debt Resolution Experience
As you can see, there are many paths to take and finding the best one for you could be tricky. Our attorneys combine over 50 years of debt resolution experience to bring you the best perspective on how to find lasting financial stability and peace.
Call us today at 866-261-8282 for a free consultation. We look forward to speaking with you.