ARRANGE AN APPOINTMENT
Many people these days find themselves with negative equity in their home, unable to afford their monthly mortgage payments and buried with unsecured debt. These individuals often choose to file a bankruptcy in order to discharge their unsecured debt as well as the potential deficiency judgment arising from the negative equity in their home. A common practice for a person in this situation is to file a chapter 7 bankruptcy, surrender their home to the mortgage company and remain in their home until the completion of the foreclosure process. Due to the soaring number of defaulting homeowners, the banks and courts are understandably backlogged. As a result of the backlog and resulting delays, homeowners can often stay in their homes for a year or longer without paying their mortgage before they are forced to leave their home. Although this typical situation is beneficial to debtors as they can live “rent free” for quite a while, an issue which is not often addressed is whether chapter 7 debtors are responsible for their post-petition condominium or homeowners’ association fees and assessments. In short, the answer is “yes” as the bankruptcy discharge applies only to fees and assessments that accrue before the commencement of the bankruptcy case. It does not apply to fees and assessments’ arising after the bankruptcy is filed1.
Accordingly, if chapter 7 debtors choose to remain in their home after filing bankruptcy, lawyers should advise their clients of the ramifications. One such ramification is that post-petition condominium and homeowners’ fees and assessments are nondischargable and will have to be paid if pursued.
