Extreme Debt Situation

[exinitrix]

A house that I own (not currently living in) is worth $ 275,000. My previous tenant had totally trashed the house, leaving me to spend thousands of dollars in repairs. And to top it all off, they left the house and not even bothered to pay the 3 months worth of rent money, leaving me with a home I needed to sell.

In the process of selling the home, the HomeOwners Association took my house without my consent and placed it on the market (because I was behind in monthly payements). They are putting it up for auction soon, and said that whatever remainder is left of the $275,000 I will have to pay.

For 3 years I had avoided them, and was just a couple of months until the debt would have been "invalid". I was denying all contact from them, including phone calls, mails, and debt visits. But one day, my son answered the door (he is age 16) and signed for a letter from the HomeOwners Association.

It stated that I had to pay the remaining amount of money from the auctioning of the house that is to happen in June of this year.

So my question is: Do I still have to pay the debt after indirectly contacting them? Or could I still "hide" from them for the next few months?

Or even worse..should I sign up for Chapter 7 Bankruptcy?

[BigJohn]

Home Owner Association fees generally are not a lot of money each year and I don't think any of the associations can sell your house.

Is it your Home Owner's Association or is it your mortgage holder who is going to sell your home in June?

If they plan selling your house in June, I guess you can file bankruptcy just prior to the auction which will create a stay on the property.

Do you want to keep the property?

[HHM]

Home Owner Association fees generally are not a lot of money each year and I don't think any of the associations can sell your house.

Actually, HOA's can foreclose a persons house. In fact, that is the main collection tool that HOA's use. Most states have some form of Common Interest Ownership Statute which gives an HOA the right to lien and foreclose the lien (often without suing the individual) for non-payment of HOA dues.

[exinitrix]

The property is more trouble than it is worth, so I don't mind if they sell it.

But I don't want to have to pay $200,000+ (worst case scenario).

I am weighing out my options here.

Me and my wife make roughly 40k a year. So should I sign up for Chapter 7 Bankruptcy? (This might include our house. But I don't want to have to live in an tiny apartment again..)

And I have another question:
Since I've been totally blocking all communication from the debt collectors, does my son's signature on the letter ruin all of that? Does my debt become valid again?

[ready2puke]

I didnt think a 16year old could legally sign for that? I read somewhere on this board recently....I think it has to be an adult..
Any opinions?

[exinitrix]

The thing is I can't do anything about it. They have the house under their control. When I attemped to clean the house and get it sold, someone called the police and said I had no right.

Now my lenders do not know where to get their money from because some of the house money was suppose to go to them, but now since HomeOwners Association has it...

And yes I know it's my fault =/ I'm just seeing if there is any other options than having to file bankruptcy.

[CompTweaker]

Actually, HOA's can foreclose a persons house. In fact, that is the main collection tool that HOA's use. Most states have some form of Common Interest Ownership Statute which gives an HOA the right to lien and foreclose the lien (often without suing the individual) for non-payment of HOA dues.

Yes indeed!

[catleg]

Trying to put this in human comprehensible format.

You have a rental property, with mortgage(s) and HOA lien, going up for auction, and you're afraid the proceeds won't cover the debts?

Clearly the HOA lien is junior to the mortgages. Kind of makes it stupid for them to foreclose unless they think they're going to get money, or they want to get the house back in the hands of someone who can take care of it.

As I understand it usually the mortgage company shows up and bids the amount of the mortage. Does anyone know if this is true or am I hallucinating?

So at that point the amount owed the HOA is "perfected" and just becomes unsecured debt to you.

One question: since you are clearly going to lose this house, are you paying the mortgage?

[HHM]

Be careful....you really need to look at your state's law. HOA liens can often times take priority over the mortgages. HOA liens, if the law is written as such, are like tax liens. The HOA can sell the property for the amount of their lien, and the buyer may be responsible for dealing with the mortgages.

[catleg]

The process has to work the same no matter who causes the foreclosure, right?

I believe the first mortgage holder bids his balance to protect his interests, otherwise he gets crammed down to whatever the winning bidder pays.

The lower ranked creditors probably get hosed, unless they're willing to pay off the first mortgage position and assume that risk themselves, unlikely, right?

So for the HOA, it really amounts to a forced sale to just get somebody new in the house who is going to pay the dues, and then a collection effort to get the deficiency from the ex-homeowner.

Sounds like lose-lose-lose all around, maybe that's why nobody likes to live (own) amongst investor owned properties!

(seems like HHM just got here also...he actually knows what he's talking about).

That part about HOA liens being like tax liens is pretty scary. So what happens if the house auctions for less than the balance of the first mortgage? Is this a case of caveat emptor, the buyer then becomes on the hook for the existing mortgage? In other words, is it possible that this leads to a chain reaction of sales, first by the HOA and then by the bank if the buyer didn't know what they're doing?

In other words, is the auction then really an auction for the equity in the house rather than clear title to the house? Forgive me, my knowledge of the details of real estate transactions is lacking.