HOA Lawsuits On the Rise: HOA Fees After Bankruptcy
Property values have plummeted and more and more homeowners have made the decision that their best option for mortgage debt relief is to file bankruptcy, get a fresh start, and let their property go to foreclosure.

August 15, 2011 /24-7PressRelease/ -- Property values have plummeted and more and more homeowners have made the decision that their best option for mortgage debt relief is to file bankruptcy, get a fresh start, and let their property go to foreclosure.

But this strategy of obtaining mortgage debt relief doesn't always work out as planned. Sometimes, for unknown reasons, a lender may take months, or even years, to complete a foreclosure sale. You can never be sure of when a foreclosure sale will ultimately be completed. You cannot force your lender to act any faster than its often incompetent staff and disorganized departments and procedures will allow it to act. While many foreclosures complete in as little as four months, sometimes the foreclosure process ends up taking much longer to complete.

When you walk away from your property and your lender does not promptly complete a foreclosure sale, nobody is paying for the HOA dues each month. HOA dues continue to accrue and the HOA suffers financially and cannot fund the HOA's usual operations. Your HOA then turn to its lawyer, who will often advise it to sue to collect the unpaid HOA fees.

Sure, your HOA can, and many HOAs do, record a lien against your property. However, an HOA lien does not do your HOA any good if you owe more on your property than what your property is worth. In such a case, an HOA lien does not really have any value and your HOA's only practical remedy is to sue for the balance of the unpaid HOA dues.

But doesn't bankruptcy terminate your liability for HOA fees? Not exactly. Here's a good rule of thumb for analyzing HOA fees and bankruptcy is: all HOA fees before bankruptcy are wiped out, and all HOA fees after bankruptcy are your responsibility for so long as you remain on title to your property.

So when you file bankruptcy and walk away from your property, in the event that your lender does not immediately complete a foreclosure sale you remain on the hook for HOA fees after bankruptcy for as long as your lender takes to complete foreclosure.

San Diego, California has seen steady rise in HOA lawsuits that sue homeowners for HOA fees incurred after bankruptcy. Talk to any experienced and reputable bankruptcy attorney in San Diego and they'll tell you, HOAs are suing everybody. As explained by bankruptcy attorney Mark Aalam, "I personally represent a couple of HOAs in San Diego and I frequently get requests by an HOA to sue homeowners for unpaid HOA fees. While I usually advise against it because of a cost-benefit analysis (the high cost associated with suing a homeowner and the relatively small amount of most HOA claims for unpaid fees and possibility of not being able to collect a judgment), I have noticed that many other attorneys seem to routinely sue all homeowners whose accounts are delinquent."

What can you do to protect yourself against the rise in HOA lawsuits? If you are planning to give up your home, be proactive to make sure that title is taken out of your name. You can get your name off title by selling your home, whether by short sale or ordinary private sale. A foreclosure, if it is completed, will take title out of your name. In some cases, your lender may be willing to accept a deed from you transferring title back to your lender.

Whatever the method of getting your name off title, you should be proactive to make sure that it happens. Until title is taken out of your name, you will continue to remain liable for HOA fees even after bankruptcy.

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