Handling Home Owner Associations After Bankruptcy
- If you surrender real estate: Homeowner’s association debts are dischargeable in bankruptcy but only what was due on the date you filed. Homeowner Association dues that accrue after the bankruptcy and while you still own the property are current debt and you still owe it. That means if you don’t pay it you can be sued, the debt can be turned over to a collection agency or attorney for collection, and it can be reported as a delinquent debt to the credit bureaus.
- Delays in Foreclosure: Mortgage companies don’t have any timetable they have to follow in foreclosing. They often will take months, if not years to foreclose. This puts the debtor is a bind because if he doesn’t pay the monthly dues he can be subjected to collection letters, phone calls, municipal fines, diminished credit, and even litigation and there is nothing he can do about other than pay the debt.
- If you fee like gambling: You can ignore the homeowner's dues if you are willing to take the risk. Often times when the foreclosure finally happens the delinquent homeowner's dues are paid by the lender to clear the title to the real estate. This takes the debtor off the hook, but there is no guarantee this will happen and until the foreclosure actually takes place all the aforementioned collection horrors may still be inflicted on the debtor.
- If you stay in your homestead after bankruptcy: If you reaffirm the debt or just keep making payments each month to your mortgage company, don’t stop paying your homeowner’s dues. These dues are a lien on the homestead and eventually must be paid. The best practice is just keep them current. Even if you have the delinquent dues in your chapter 13 plan you should still make your current payments on time.
- Dispute any erroneous credit reporting by homeowner associations: These associations are often run by individuals who don’t understand bankruptcy, so if they report to the bureaus make sure the reporting is correct and dispute it if it is not.
Dealing with Judgments That Don’t Seem To Go Away After Bankruptcy
Pre-filing judgments
- Judgments that have been obtained before you file bankruptcy often cause problems. Whereas the underlying unsecured debt will be discharged in your bankruptcy the judgment itself may still be a matter of public record. In Texas the judgment will not attach to your homestead due the Texas exemptions laws, but they will attach to non-exempt real estate and become a secured claim and a surviving lien against that real estate.
- Bankruptcy attorney’s often ignore this problem and debtors only learn about it after the bankruptcy is over when they try to refinance or sell the non-exempt property. You would think non-exempt real estate would be seized by the bankruptcy trustee, but sometimes there is little or no equity so the trustee abandons the property.
- How judgments affect homesteaded property. Even though the judgment lien does not attach to the homestead, title companies will still require a partial release of the judgment to remove any possibility that the judgment may have attached. They are only in the insurance business, so why take any risk, right?
- Creditors can be forced to sign these partial releases but somebody has to prepare a form of release, present it to them and demand they sign it. It they refuse you will have to hire an attorney to file suit to compel them to do it!
- Getting judgments off your credit report. Sorry, it’s a matter of public record and wrong or right you are stuck with it. I have noticed some cases where the credit report will show the judgment as “paid” and give the date of the bankruptcy discharge. If this happens to you, be happy because I am not sure they really have to do that since it is not always clear from the information in the credit report that the lien might not have attached to something.
- Get a release. The best practice is to get a release of the judgment if you can and be sure to file the deed in the judgment records at the County Clerk's office. That recording of the release should eventually show up on your credit report and put the judgment behind you.
Post-filing Judgments
- Judgments that are entered after a bankruptcy is filed for debts owed at the time of filing are a violation of the automatic stay or discharge injunction. Your attorney shouldn’t have any trouble getting those quickly released. If a creditor refuses to release them and cease and desist from enforcing them you have an attorney file a contempt motion or adversary proceeding in the bankruptcy court to put a stop to it. .
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