If the HOA is for a rental property, the HOA is not dischargeable whether the fees arise before or after filing of the bankruptcy. If the property is the residence of the debtor, the HOA fees that arise before the bankruptcy is filed are discharged. The HOA fees that arise after the bankruptcy is filed, if the debtor still owns the residence, are not discharged. The authority for this is Section 523(a)(16) of the bankruptcy code : Exceptions to discharge - : (16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable or possessory ownership interest in such unit, such corporation or such lot, but nothing in this paragraph shall except from discharge the debtor of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;”

The problem that may happen during these unusual economic times where banks sometimes are not in a hurry to foreclose on upside down properties is that debtor who is willing to abandon his residence will be incurring non dischargeable HOA fees for as long as the bank has not foreclosed. In some cases, banks do not foreclose for an extended period of time. To illustrate, debtor files for Chapter 7 relief today and is willing to abandon his residence. The HOA fee is $300 a month. One year after his bankruptcy filing, bank has not foreclosed on his house. The HOA then sues debtor to collect $3,200 for one year of HOA fees plus legal fees. Is the $3,200 and legal fees discharged? NO. Is $4,000 of HOA fees incurred before bankruptcy was filed discharged? YES.

Is there anything debtor can do to force creditor to foreclose his house? Debtor could propose a deed in lieu of foreclosure where debtor deeds back the property to creditor instead of foreclosure. However, a bank that will not foreclose probably will not accept a deed in lieu of foreclosure.

《楊清泉律師專欄》TREATMENT OF HOMEOWNER ASSOCIATION FEES IN BANKRUPTCY (Part II)