Filing for a Chapter 7 bankruptcy can clear your personal debts, which can include your unpaid Homeowners Association (HOA) dues. While you may breathe a sigh of relief, the HOA’s existing lien typically remains attached to your home.
Falling into this situation can be overwhelming. Understanding how Texas laws interact with federal bankruptcy laws is the first step toward a solution.
What happens to your overdue HOA fees?
Since unpaid HOA dues are personal liability, these are dischargeable under Chapter 7 bankruptcy. This means you will no longer be personally liable for them. Additionally, a federal automatic stay goes into effect, preventing the HOA from sending you delinquency notices. They also cannot sue you personally, take money from your bank account or garnish wages.
However, this discharge does not apply to any assessment that becomes due after the filing. You must continue to pay these dues to stay in good standing, especially if you maintain a legal or possessory interest in your home.
Can bankruptcy erase the HOA lien on your house?
Unfortunately, a bankruptcy filing cannot erase the HOA lien on your house. Because it is a property liability, the debt is attached to the land. Chapter 7 does not automatically remove statutory liens in Texas, leaving your house vulnerable to foreclosure.
Once your bankruptcy case closes, the HOA can pursue an Expedited Judicial Foreclosure. They must obtain a court order before proceeding with a sale, which provides a window of time for negotiation.
Taking action to protect your home
The best defense is a proactive one. Avoid waiting for a foreclosure notice. The high stakes of your situation can be difficult to navigate alone. A seasoned attorney can help you negotiate a plan that protects your equity.
