Until recently, if you owed homeowner or condo association dues or assessments, even if you filed for Chapter 13 bankruptcy and no longer lived in the home, you could end up being on the hook for association fees until such time as the lender forecloses on the property or you were no longer title owner. But a new decision by the Ninth Circuit Court of Appeals is offering relief for property owners, some of which had racked up thousands of dollars in fees for condo or homeowner’s associations on a property that had long since sat unoccupied.
The case, Goudelock v. Sixty-01 Association of Apartment Owners, No. 16-35384 (9th Cir. July 10, 2018), started way back in 2009, in Redmond, WA, when Penny Goudelock ceased paying her condo dues. In 2011, Ms. Goudelock moved out, filed for Chapter 13 bankruptcy and surrendered her unit as a part of her Chapter 13 plan. The condo sat unoccupied until it the lender finally foreclosed in 2015. Prior to filing for Chapter 13, Ms. Goudelock had amassed more than $18,000 in unpaid dues, and those continued to mount at a rate of nearly $400/mo for nearly 4 years.
In 2015, Sixty-01 petitioned the Bankruptcy Court for a determination that the dues accumulated after Ms. Goudelock filed for Chapter 13 would not be discharged and that they constituted a personal obligation that Ms. Goudelock should remain responsible to pay after her bankruptcy. Originally, the bankruptcy and district courts held for the condo association.
However, the Ninth Circuit Court of Appeals decided to take a look at the case, stating that post-petition assessments for condo association fees had never been addressed by any circuit level court with respect to a Chapter 13 case, although two other circuits have reviewed dischargeability of association dues in Chapter 7 cases.
Upon review of Ms. Goudelock’s case, the 9th Circuit ruled that her personal obligation to pay the dues is dischargeable in Chapter 13 bankruptcy because the Bankruptcy Code does not specifically except such a debt from discharge under 11 USC §1328 and the Court was not persuaded by Sixty-01’s various other arguments. Chapter 13 provides a broader discharge than a Chapter 7 bankruptcy, so a Chapter 7 filer will remain responsible for post-filing homeowner’s dues or assessments until no longer on title.
What does this mean for you?
Prior to this latest ruling, you were personally responsible for any accrual of homeowners’ or condo association dues or assessments, even if you no longer lived in the property and even if you had filed for Chapter 13 bankruptcy until such time as you were no longer the title owner of the property. Now, if you own a condo or property with homeowners’ association obligations, you can file for Chapter 13 bankruptcy and not be personally responsible for HOA dues assessed after you file your petition on a property you wish to surrender. Keep in mind that any pre-petition dues will be treated as an unsecured debt and your homeowners or condo association will be added to the list of general creditors. The association does remain able to pursue the property through foreclosure.
The Court correctly interpreted the spirit of a Chapter 13 filing as a way to discharge debts, and essentially give a debtor a fresh start. If you have questions about unpaid condo or homeowners’ association fees, we would be happy to discuss your situation and options with you.