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Can Homeowner Association (HOA) fees be discharged through bankruptcy?

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Debtors who file for Chapter 7 bankruptcy and owe HOA fees may be able to wipe out these debts. Filing a Chapter 7 bankruptcy is usually a good option if the debtor wishes to give up their home. However, it is important to remember that HOA fees that accrue after filing for bankruptcy cannot be discharged.

A debtor who files a Chapter 7 bankruptcy is required to sign a statement of intention regarding secured debts. This form tells the court and trustee whether the debtor wishes to retain or surrender their property. Debtors who can no longer afford their homes often choose to surrender their property through a Chapter 7 bankruptcy. Through a Chapter 7 bankruptcy, a debtor may be able to discharge all the debts associated with their home, including any homeowner’s fees.

There are a few options for debtors who acquire HOA fees after filing a chapter 7 bankruptcy. One possible solution might include contacting the HOA directly to negotiate a settlement or agreeing to let the association take the property. We recommend contacting an experienced bankruptcy attorney before taking any action.

Another issue arises with HOA fees when a debtor converts his or her bankruptcy from a Chapter 13 to a Chapter 7. The issue then becomes, “does the debtor have to pay any homeowner’s fees that accrued during the bankruptcy transition?”

In most courts, a debtor will be allowed to discharge debts acquired after filing a Chapter 13 bankruptcy through a new Chapter 7 bankruptcy if the debt is normally discharged by bankruptcy. This should mean a debtor’s HOA fees maybe eliminated as soon as the Chapter 7 is filed.

In order to eliminate these debts, the debtor is required to amend their bankruptcy forms to include any debts acquired after the Chapter 13 bankruptcy was filed. Additionally, a debtor will have to file a Statement of Intention for all secured debts. Some courts may require the debtor to file a new set of schedules as well as some other forms.

There are many good reasons why a debtor may wish to convert their bankruptcy from a Chapter 13 to a Chapter 7. The usual reason this occurs is when the debtor’s financial circumstances have changed and he or she can no longer make their Chapter 13 plan payments. It may also be a good idea to convert to a Chapter 7 when the debtor no longer wishes to keep their home or another secured property.

Debtors who do wish to keep their home should continue paying their HOA fees.

For more information regarding HOA fees and bankruptcy, contact the Law Office of David M. Goldman, PLLC at 904-685-1200 for a free consultation.

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