Condo Owners and Bankruptcy

Condo Owners and Bankruptcy – What You need to Know

Condominium owners facing bankruptcy, as well as Condo Associations, should be aware of how Chapter 7 or Chapter 13 affects condo owners. Under Section 523(a)(16) of the bankruptcy code, condominium association fees are not dischargeable through bankruptcy, unless association fees were first assigned after a condo owner filed for Chapter 7 or Chapter 13. Practically speaking, this means monthly association fees could continue to accumulate if a condominium owner is foreclosed upon. If a condo association or co-op depends on association fees to help pay for repairs or provide basic maintenance, bankruptcy on the part of a condo owner could result in a depletion of financial reserves and the need to issue a special assessment.

Bankruptcy, Condos, and Non-Dischargeable Association Fees

Since association fees are not typically dischargeable through bankruptcy, both the condo owner and the homeowner association face the prospect of accumulating association fees until the unit in question is resold. When a foreclosed upon condominium is eventually resold, the bank or lender should pay off any liens or encumbrances placed on the property. At this point, association fees in arrears should no longer be a problem. The issue, however, is the financial strain placed on both the condo owner and the homeowner association leading up to foreclosure and resale.

Bankruptcy and Financial Strain placed on Homeowners Associations

Given the downturn in the economy, some homeowners associations have struggled with multiple bankruptcies on the part of condo residents. In most cases, condo owners are inclined to pay their mortgage or other bills before they pay monthly homeowner’s association fees. In order to pay upkeep fees and meet contractual obligations with vendors and subcontractors, homeowner associations have increased monthly fees in order to avoid breach of contract for certain kinds of contracted services. However, this can make it even more difficult to collect monthly fees when increases reach a point where other condo owners can no longer afford to pay them.

Considering Bankruptcy as a Condo Owner? Contact Leinart Law Firm

Due to the depreciation in home values, banks are reluctant to foreclose on condominiums since they don’t want to pay condo fees. The financial strain has led some homeowners association to consider filing for bankruptcy, a complicated and uncertain solution to foreclosures in a development.

If, however, you are a condo owner and are struggling to pay your mortgage, association fees, credit card monthly balances, or medical bills, bankruptcy can help you avoid foreclosure. Under the terms of Chapter 7 and Chapter 13 bankruptcy, you can discharge unsecured debt, providing you with additional disposable monthly income necessary to pay your mortgage and association fees.

To learn how bankruptcy may be right for you, contact Dallas – Fort Worth – Plano Chapter 7 and Chapter 13 bankruptcy lawyers at Leinart Law Firm today. We can evaluation your financial situation and discuss the best options available to you.