Homeowner Association (HOA) and Condo Association (COA) fees can feel like an inescapable burden when you are already struggling with debt. For Michigan homeowners considering bankruptcy, a crucial question is whether filing for Chapter 7 or Chapter 13 will finally wipe out these ongoing assessments.
The Short Answer for Michigan Debtors:
Yes, Chapter 7 bankruptcy can discharge your personal liability for past-due HOA or condo fees that came due before you filed your case (pre-petition debt). However, under U.S. Bankruptcy Code 11 U.S.C. § 523(a)(16), fees that come due after you file (post-petition debt) are generally not discharged for as long as you legally own the property, even if you intend to surrender it.
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Does a Chapter 7 bankruptcy completely eliminate my HOA or condo association fees in Michigan?
No, a Chapter 7 bankruptcy only discharges your personal liability for fees and assessments that became due before the date you filed the petition (pre-petition debt). Any fees that accrue after the filing date (post-petition debt) are generally not discharged, pursuant to 11 U.S.C. § 523(a)(16), for as long as you retain legal title to the property.
If I surrender my home in Chapter 7, am I still responsible for post-petition HOA fees?
Yes. Stating your intention to "surrender" the property in bankruptcy does not automatically transfer legal title. You remain personally liable for all HOA or condo fees that come due after your filing date until the property is officially transferred out of your name—typically through a foreclosure sale by the mortgage lender or an accepted Deed in Lieu of Foreclosure.
Does the HOA’s lien for unpaid fees survive a bankruptcy discharge in Michigan?
Yes, the HOA or condo association's lien on the property itself survives both Chapter 7 and Chapter 13 bankruptcy. While the bankruptcy may eliminate your personal obligation to pay the pre-petition debt, the lien remains attached to the property. This means the association can still enforce the lien later, potentially through a judicial foreclosure sale, even if the mortgage is also underwater.
How do I handle ongoing HOA fees if I keep my home in a Chapter 13 bankruptcy?
If you elect to keep your home in a Chapter 13 plan, the plan will address the pre-petition arrearages (past-due fees), paying them off over the 3-to-5-year term. However, you are separately required to make all current monthly HOA or condo assessments directly to the association on time. Failure to pay current fees could result in the association asking the bankruptcy court to lift the automatic stay.
Can a Michigan HOA foreclose on my property if my personal debt was discharged in bankruptcy?
Yes, an HOA or COA can pursue a non-judicial or judicial foreclosure on the property to enforce its surviving lien. Even if your personal debt for the fees was discharged, the lien itself is an encumbrance on the property. If you fail to pay the fees that accrue after the filing date or the debt secured by the surviving pre-petition lien, the association can move to foreclose on its interest in the property.
