You can now discharge (get rid of) all HOA debt for property you surrender in chapter 13 bankruptcy if you live in California. The 9th Circuit has just ruled that contrary to previous lower court rulings in our area, all HOA dues are discharged in bankruptcy for people who surrender their property in chapter 13. Goudelock v. Sixty-01 Association of Apartment Owners, 895 F.3d 633 (9th Cir. 2018).
Bankruptcy discharges debt that you owe at the time you file bankruptcy, but not debt that you incur afterward. Before the new ruling in Goudelock, bankruptcy courts here had held that debt owed for HOA fees for the months after bankruptcy was filed were not discharged by the filing, because those were debts incurred after filing bankruptcy. When chapter 13 debtors surrendered a property, they had to either start paying the monthly HOA fees after their bankruptcy filings until title to the property was transferred out of their names, or incur a debt that would be owed after their bankruptcy case was completed. Some lenders have been reluctant to accept surrendered property, and bankruptcy courts generally do not have the authority to force lenders to take it. Chapter 13 debtors with HOA fees were often stuck with months or even years of HOA debts from the time they filed their bankruptcy cases until title was finally taken out of their names.
The 9th Circuit ruling in Goudelock changed the previous court holdings. The court held that HOA debts are incurred at the time that people buy the property and agree to pay the HOA fees, not each month when a payment becomes due. Therefore, so long as a chapter 13 debtor surrenders the property, the HOA may not come after them for any fees owed after the bankruptcy is filed, even if title to the property remains in the name of the debtor. While this new ruling mainly affects people who want to surrender condominiums in chapter 13 bankruptcy, many people who own houses also have to pay HOA fees, and these people will also have their HOA debts completely eliminated if they surrender their property.
If you have serious financial problems, contact a bankruptcy attorney today. If you want to surrender a condo or a house for which you are responsible for HOA fees, you can now get rid of all of those fees, including the ones for the months after your bankruptcy case is filed.