Pursued after Foreclosure: Deficiency Judgments & Unpaid HOA

[phsunny]

Hi bcohen,

Yes, we filed for Chapter 7 BK and were dischrged in April 2010. We did not reinstate the mortgage, therefore, it was included in our BK. Thanks for your kind words......and I have an update. Hubby spoke with Wells Fargo today and told them that the HOA redid the streets after WF secured the property (changed the locks) and are looking to be paid. WF told him that all the HOA needs to do is fax an invoice for the street fee along with our loan # and they will see that it gets paid!! Sounds crazy I know!!! But this certainly puts a new light on the situation and our ability to reach an acceptable settlement with the HOA tomorrow in court. Wish us luck!!

[tobee43]

HOA fees and costs are not dischargable. do not waste your time or money to attempt to fight it:

A homeowner that owns property subject to homeowners association (“HOA”) dues or fees should be familiar with 11 U.S.C. §523(a)(16) if they are contemplating bankruptcy.

Section 523(a) provides that a discharge under Chapter 7 (§ 727), Chapter 11 (§ 1141), Chapter 12 (§ 1228(a) & (b)), or Chapter 13 (§ 1328(b)) does not discharge an individual debtor from any debt–

(16) for a fee or assessment that becomes due and payable after the order for relief (generally after the bankruptcy petition is filed) to a membership association for as long as the debtor has a legal, equitable, or possessory ownership interest in the property subject to the fee or assessment.

The section is not quoted in detail, but the message should be clear: even if you file bankruptcy and receive a discharge, any fees or assessments that become due after the filing of your bankruptcy (post-petition) remain your responsibility as long as you have a legal, equitable or possessory interest in the property. Even if the property is in foreclosure, the post-petition fees and assessments remain your responsibility until the foreclosure sale actually takes place and you no longer own the property. Don’t be lulled into a false sense of security because a foreclosure sale date has been set. The filing of the bankruptcy petition will prevent the sale from taking place until the stay is lifted and foreclosure sales often get continued.

In chapter 13, debtors often receive a discharge under section 1328(a), which is not included in the sections cited above for which the discharge does not apply. Section 1328(a) gives a “super discharge” and seems to discharge obligations under section 523(a)(16). A debtor in the State of Washington recently attempted to use section 1328(a) to discharge post-petition HOA fees. Although applying Washington law, the 9th Circuit Bankruptcy Appellate Panel held that the post-petition HOA fees were not dischargeable under section 1328(a) because the obligation to pay the fees was not in the nature of a claim but rather an obligation that ran with the land. (In re Foster, 435 B.R. 650 (9th Cir. BAP, 2010).) This is consistent with the reason most people file chapter 13: to save their homes and be allowed to cure defaulted payments and make current payments."

however, i would still attempt to reach an amicable solution with the HOA. i know in our HOA we work with people and try not to take them to court. we put liens against the property and the bank must resolve the issue prior to the re-sale of the property, or they cannot obtain a clear title, as i had mentioned in this thread earlier.

best of luck tomorrow!

[phsunny]

Hi Tobee43, thanks for the words of wisdom!

We were in court already today and the HOA's attorney requested a continuance due to the new information from WF that my hubby received yesterday. I will keep you all posted as to whether WF pays the invoice for the "new street fee" that they said they would. If this works out then it looks like we would only be on the hook for the $400 past due assessment (which is much more do-able than $2500). At that point we would try to create a settlement that ends with this one and only payment - period.....regardless of how much longer it takes the bank to actually foreclose - to me - that would be a HUGE WIN!

[phsunny]

Hi Gang,

I thought I would give you all an update on our HOA battle.

Well, for 5 months now the lawyer for the subdivision has asked for and received "Continuances" in our County Court. We had actually paid a lawyer $500 to "represent" us since their jerk of a lawyer would not even acknowledge us or the settlement we were proposing. Anyway, the $500 ran out fast and hubby and I made the decision that if this matter was continued into October, that we were going to fire our legal counsel and take action ourselves, and that is just what we did!

We composed a very heartfelt letter explaining the last 3 years of our lives (bankruptcy, losing our businesses, foreclosure, etc) and attached a new settlement offer (slightly more than the original we proposed) and not only delivered it by hand into each mailbox on our old block but also with the help of a great friend (ex-neighbor still living in the neighborhood) emailed a copy of the letter and the settlement proposal to every neighbor along with her personal plea for mercy upon us! Well, out of a subdivision of 24 (4 homes bank owned) we have 7 votes in favor of the subdivision accepting our settlement and 4 that we are currently actively pursuing getting support from. I must say, it was very cathartic to lay everything out on the line, but honestly, we felt we had nothing else to lose here. And......in a side note, this tactic really pissed off the Current Trustees greatly (truth be told, that put a smile on my face!)

So, regardless of whether we have 7 or 11 votes in our favor, I will be standing before a judge later this month to present this information and I suppose, at that time, let the chips fall where they may, this is our last ditch attempt to settle. Any advice from any legal types out there?

[phsunny]

Hey Gang,

Well our battle with our old HOA is finally over. The results???? ............we settled at $1,000. $400 to be paid this month and the remainder to be paid in $34 monthly installments for the next 18 months.

Honestly, it was awful......a real nightmare, but in the end we feel like we got off lucky!

The plaintiff's (our old neighbors) came to us before court began with the $1,000 settlement offer. We thought about it and refused.....not realizing what we would be subjecting ourselves to!

The judge, who was (in our opinion) totally biased, began by looking at the other side's lawyer and saying what a "reasonable" man he "knew" this guy to be and how they went back many, many years! He also said he knew that their lawyer was always open to working with people to settle things outside of court which made him wonder about us and why we weren't reasonable. This was after he had put us through 8 court continuances and complete refusal to present any of our settlement offers to his clients (our old HOA)! Well, besides making us want to throw up, we knew at that moment that we were TOAST! We knew instinctively that if this judge were to rule on our case it would not be in our favor. Not only would they win both the street fee and the dues but legal fees, court costs and penalties as well (probably in excess of $3,500!!)

So at this point the judge asked us if we wanted him to do the trial right then or did we want to have a discussion with the plaintiff? DUH, we chose to discuss!! We were really suprised that they stuck to their original settlement proposal to us, because it seemed really clear in the courtroom as to how screwed we were going to be! We figured that they would have upped it just to take a jab at us. The whole thing was really exhausting and also, in a big way, disheartening in regard to the so-called fairness of a "court system" that appears to be nothing but a Good Ole Boys Club.

We are really happy it is over! You know, the sad thing is that we were always willing to make a deal and have been attempting to since April of this year - what a bunch of wasted time and energy. Our HOA Trustees refused to even discuss any form of settlement until the week before the trial date this past Tuesday, and at that point they finally offered to settle at $1,200 but we declined.

Maybe the old neighbors were touched by the upcoming Christmas Season, and decided to show some mercy? Or maybe, they didn't want to pay the lawyer any more money for garnishment orders and investigations related to tracking us down for garnishments? I suppose we will never know. But the lesson here for sure is what it says in this forum, and that is to just pay the stinking dues - because it is just not worth the stress and upset of letting things go too far!

Happy Holidays everybody!!

[tobee43]

so happy to hear this is FINALLY over!!!!!!!!!!!!!!!!!

the holidays will be so much better now that is over for you!!!

[kjrmom911]

I'm glad to hear this is finally settled. This whole thing has only reconfirmed my belief that I was right to never want to purchase a home that had any HOA associated with it. I am ok with my neighbors parking their car on the street from time to time. I'm ok with the odd blue color that my neighbor down the street chose to paint his house. I love my neighborhood and my neighbors and I believe we are a true community, which in my opinion is better than an HOA any day!

[aquabluesrq]

Congrats phsunny! I love happy endings!

I am now officially a member of the mortgage deficiency default judgement club courtesy of BB&T!

After a failed 100% payback Ch 13. I tried settling with BB&T. We were presented with a contract and everything. We negotiated $45,000 down to $15,000. However, the wording of the contract was very suspect. Basically read that if BB&T decided we could afford to pay more down the road they could come after more. They refused to remove the wording, so we refused to sign the contract and so they got nothing.

Fast forward 3 years, and here we are with a default judgement. Plan to file Bk soon.

We were also being sued by our HOA. Haven't heard a peep since they threatened to foreclose. I guess the 1st mortgage holder decided to pay them rather than have the HOA foreclose.

This has been foreclosure from hell! 5 years and counting!! If only my FORESIGHT was 20/20! So ready for this to be over!

[tobee43]

Congrats phsunny! I love happy endings!

I am now officially a member of the mortgage deficiency default judgement club courtesy of BB&T!

After a failed 100% payback Ch 13. I tried settling with BB&T. We were presented with a contract and everything. We negotiated $45,000 down to $15,000. However, the wording of the contract was very suspect. Basically read that if BB&T decided we could afford to pay more down the road they could come after more. They refused to remove the wording, so we refused to sign the contract and so they got nothing.

Fast forward 3 years, and here we are with a default judgement. Plan to file Bk soon.

We were also being sued by our HOA. Haven't heard a peep since they threatened to foreclose. I guess the 1st mortgage holder decided to pay them rather than have the HOA foreclose.

This has been foreclosure from hell! 5 years and counting!! If only my FORESIGHT was 20/20! So ready for this to be over!

so sorry to hear all this!!!

i don't want to be the continued barer of bad news...however, do NOT forget that any HOA fees or accessments are NOT dischargable in a bk, not even a no asset 7. try to see if you can work something out with them, or it will ballon into a huge monster best of luck to you!

[aquabluesrq]

Thanks Tobee. This has definitely been a nightmare!

From what I understand about HOA dues is that BK wipes out fees due BEFORE you file, but you remain liable for any dues accrued after as long as the property is in your name.

Im pretty sure that's what the attorney said, but I'll double check. This just keeps getting better!!

I swear, I will live on the streets before I sell my soul to another bank, HOA, or local government! Lol. Homeownership is not for me! Never again!

[tobee43]

well...yuck! as far as i understand, which i would check i hope i'm incorrect, but i would ask your atty about 11 USC § 523 - exceptions to discharge (referring to bk) .... (16) for a fee or assessment that becomes due and payable after the order for relief to a membership association. the problem is that usually most state law,says HOAs can file ''Super Priority Liens'' that are ahead of mortgage liens, meaning the HOA lien amounts have to be paid for the owner, even one that is bankruptcy.

i would just recheck this with your atty, however, as far as i know they can even go after you for any assessments that may have occurred during the time you may have vacated but still owned the property.

[despritfreya]

TB,

The placement of the HOA lien depends upon state law. Some states give a super priority for the entire amount. Others only for a dollar certain. Still other, like mine, put the HOA behind a 1st mortgage lien but ahead of a 2nd (even a PMSI 2nd).

Under 523(a)(16), post petition amounts - until the property is sold or foreclosed - are the owner's responsibility. The pre petition amount is discharged but the lien (like a mortgage) will survive the bk. The HOA, like a mortgage lender, can exercise its rights as it relates to the lien as permitted by state law.

Des.

[tobee43]

thank you des, that is the way i understand it to be here in florida as well, the amount is owned up until the property is sold or floreclosed. since OP's state is not disclosed, i understand HOA liens and their positions can change depending on the law of that state. thanks for making it clearer. when OP says that all of the fees are wiped out before the bk, that's not the way it works here. in florida, as you explained after the sale or the foreclosure of the property the HOA can still go after the amount that is owed to them, in this state; including any assessments incurred as well.

thanks again for the clarification des!

[aquabluesrq]

Thank you Des and Tobee for your replies.

I too live in FL and I am surrendering the home, so from what I've read and been told pre petition dues will be discharged, but I will be responsible for those accruing post petition as long as the home is in my name. If I were to keep the home, it would be an entirely different story.

I'll definitely confirm this with my attorney.

[bcohen]

Thank you Des and Tobee for your replies.

I too live in FL and I am surrendering the home, so from what I've read and been told pre petition dues will be discharged, but I will be responsible for those accruing post petition as long as the home is in my name. If I were to keep the home, it would be an entirely different story.

I'll definitely confirm this with my attorney.

That is correct, which is why the smart thing to do is wait until after foreclosure to BK. Then you can discharge any and all HOA dues/fees/penalties, because the house will be out of your name at that point.