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Are condominium association fees dischargeable in Chapter 7 bankruptcy?

by Dorota Trzeciecka on July 19th, 2011

Only the association fees and assessments that accumulated before  the filing of Chapter 7 Petition are dischargeable.  The association fees and assessments that accumulated after filing of the Petition, and before the foreclosure sale, are not dischargeable.

Unfortunately for you, and many other condominium owners here in Florida and elsewhere,  the time between the filing of the Petition and the foreclosure sale is getting progressively longer.  Lenders and loan  servicers take longer to foreclose amid the recent foreclosure crisis and the allegations of  wrongdoing for improperly foreclosing on some homeowners.   What that means is that as the amount of the  association fees and assessments is growing, and late payments and interest are added,  so is your liability for the payments.  That is because, once  the condominium is sold, the new unit owner,  who acquires the title to the property in foreclosure, will pay the association fees to avoid the association’s lien on the unit, but she or he can then turn around and recover these amounts from you, by way of different remedies, including filing of a lawsuit.

What can you do to protect yourself from the liability for post-petition association fees and assessments?   If you have resources, keep paying the fees  or at least deposit them into a designated account.  If you never have to pay them, great, you will have money saved up.   If you do not want to use your own money, and your bankruptcy case is still opened, ask your bankruptcy attorney to file a motion with the court to compel the lender to accept the deed in lieu of  foreclosure, or in the alternative, to turn the property over to you temporarily, so that you can rent it until the foreclosure is finalized.  Use the rent to cover the association fees  and assessments.   Lenders in Florida generally do not like to acquire title  through deed in lieu, because “the lender is [then] liable for payment of the unit’s unpaid common expenses and regular periodic assessments  which accrued or came due during the 12 months immediately preceding their acquisition  of title.”    You, or your attorney, may also approach the condo association with an offer to give the association permission to rent the unit on  short term basis, and to assign it the proceeds so it can recover any unpaid fees and assessments; it is like giving the association a temporary license to rent.

These are only a few suggestions, which, if  utilized, may save you from having an unwanted creditor in the future.