Do I still pay HOA dues in bankruptcy?

With most homes in Phoenix and Scottsdale, Arizona, a Homeowner’s Associations (HOA) is charged with keeping the neighborhood up to a specified standard. To do that, HOA dues are collected that provide for the neighborhood’s operations such as landscaping, maintaining recreational facilities, providing security, and sometimes exterior home maintenance.

Many Arizona residents whose homes are part of the bankruptcy process are behind on their HOA dues, too. Homeowners assume that if they are not making a mortgage payment, then they do not need to make an HOA dues payment. But the HOA dues are part of a separate contract from the mortgage and you are obligated to pay them.

While you might be able to discharge HOA dues that are outstanding WHEN the bankruptcy is filed, you are still responsible for the ongoing dues that accumulate AFTER the bankruptcy filing. You are responsible for HOA dues up until the foreclosure is final even if you have already left the home. It can take many months for banks to complete the foreclosure process.

Until the bank or a new homeowner becomes legally responsible for the property, you are still the owner and still liable under the HOA contract. The homeowners association will continue to try to collect dues from you.

It is often best to contact the HOA management company directly to discuss your options after the foreclosure or short sale is complete. Some HOAs will negotiate with former homeowners on the amount of post-bankruptcy HOA dues that must be paid to avoid a collection lawsuit. If your inquiries are unsuccessful, discuss the situation with an experienced bankruptcy lawyer.

A home is a significant part of the decision to file for bankruptcy. In fact, one of the main reasons that Arizona residents file for bankruptcy is overwhelming debt that includes their home and overdue HOA dues. But just filing for bankruptcy or facing foreclosure is not enough to invalid the HOA dues that will accumulate.