Homeowner’s association dues can create special problems for debtors in bankruptcy. If the debtor files bankruptcy in order to prevent foreclosure of their home, then the debtor can include repayment of the HOA dues as part of their Chapter 13 plan. They are still responsible for making payments that come due after the case is filed. These payments must be paid directly to the HOA.
However, if the debtor is surrendering their home in their bankruptcy case, they can discharge HOA dues that came due before the filing date, but they will still be responsible for fees that come due after the filing date, so long as the property is still in their name. Surrendering real property in a bankruptcy case discharges the debt but it doesn’t transfer title to the creditor. The creditor still needs to foreclose on the property before they take ownership. While the property belongs to the debtor they are still personally liable for HOA dues that accrue after the date of the bankruptcy petition.
When a mortgage company is slow to foreclose on property, it is usually in the debtor’s best interest. The debtor can continue to live in the house without paying the mortgage, so having to continue paying the HOA dues is not much of a burden. However, when a debtor has to relocate for a job or leave the area where their home is located, then the mortgage company’s delay in foreclosing the house can become a burden, because the debtor doesn’t get the benefit of living in the home but must continue to make payments to the HOA.