The foreclosure backlog has created one obvious advantage for some homeowners; they may be able stop making mortgage payments and pay other bills. The backlog has created a disadvantage to some homeowners who have loans on homes with home owner association (HOA) dues. The homeowners may want to move on with their lives even to the point of being willing to surrender the house, but they won’t be able to escape the responsibility of paying the HOA dues. Surrendering your house won’t end your responsibility to pay the HOA. Only foreclosure and title transfer can end your responsibility to pay the dues.
In addition, filing for bankruptcy will not always end your responsibility to pay some of the HOA dues. The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, stops certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. Creditors can no longer contact a debtor directly but must go through the U.S. Bankruptcy Court trustee in order to deal with their debtors.
If you are filing Chapter 7 Bankruptcy, and your bankruptcy has been discharged, the dues to that point might be forgiven, but HOA dues occurring post bankruptcy discharge are your responsibility as long as the title to the home has not been transferred. Surrendering the home does not transfer the title, only a foreclosure can do that.
Some homeowners who have surrendered their homes are remaining in the homes because of the backlog, and they look at paying the HOA dues as a type of rent on the property. But if you have decided to move on and out of the home your still own, to avoid harassment or the chance of being sued, it is probably wise to maintain HOA payments until the house is no longer in your name. Remember, any new HOA charges after your bankruptcy has been discharged are collectible. With a judgment against you over any charges like HOA dues, and in a state that permits garnishment, your wages could be garnished each month for the dues.
For homeowners who who want to surrender their home, they should avoid getting caught up in the HOA trap if possible. Think before you surrender. With the inventory of homes on the market not currently selling, it may be years before your mortgage company will foreclose on the property. There is no advantage for most mortgage companies to foreclose because when they do, the HOA dues are an added expense for them which is not recoverable when they sell the home. So, until foreclosure comes, you might want to consider enjoying the property almost rent free.
If you are considering surrendering your home due to loss of income, unexpected medical bills, or a divorce you may need the help of a bankruptcy lawyer. As a general rule of thumb, you are financially bankrupt if your current sustainable income will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. The bankruptcy formula should include mortgage payments and HOA dues.
If you need relief from the stress of debt and you live in or around the metropolitan area of Boston, Massachusetts, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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