HOA Liens and Bankruptcy in Jacksonville, FL

HOA Liens and Bankruptcy

I have previously written about stripping off of second mortgages in Jacksonville, FL bankruptcy:

https://www.planlaw.com/stripping-second-mortgages-in-jacksonville-chapter-7/

But what about condo and other HOA liens when you file a Chapter 7 or Chapter 13 case? Do the HOA liens get treated the same as a regular second mortgage? Can the lien be stripped in a Chapter 7 like a second mortgage?

HOA Liens in General

 HOA liens such as condo liens and homeowner’s assessments are junior mortgages which are secondary to a purchase money mortgage on a residence or investment property. See In re: OLGA P. BUSTAMANTE; Case No. 6:12-bk-12877-KSJ; http://pacer.flmb.uscourts.gov/pdf-new/63788532.pdf. Any first mortgage recorded after 1990 is a superior lien to any recorded HOA declarations. Fla. Stat. § 718.116(5)(a).

This means that the lien is subject to being stripped off in a Chapter 7 case pursuant to the McNeal decision in the 11th Circuit discussed in the above blog and in Chapter 13 cases. See In re Plummer, 484 B.R. 882 (Bankr.M.D.Fla.2013).

In order to qualify for this relief, you must file Chapter 7 or 13 case, have a home with a first mortgage (even homestead property is eligible) and the value of the home must be below the payoff of the first mortgage. Often, a tax value is appropriate to use to determine your home’s value or an appraisal may be ordered to determine valuation.

Pre-petition assessments v.  Post-petition assessments

The stripping off of the HOA lien is only valid against pre-bankruptcy assessments. Any assessments that come due after the filing of a Chapter 7 or Chapter 13 case would be excluded from discharge and being stripped by 11 U.S.C. § 523(a)(16), which provides that any post-petition assessments remain the responsibility of the owner as long as the title to the property is in the name of the owner.

 Problems with HOAs after bankruptcy

Imagine this nightmare scenario: A Couple filed Chapter 7 in 2008 and gave up their home in a community where there was an HOA. The first mortgage was delinquent and the house was underwater due to the recent real estate slump. They moved out and lived peacefully for several years. However, the mortgage company was slow in foreclosing on the home due to title issues.

Now it is 2013 and the home is still legally in the name of the Chapter 7 couple and the HOA is suing them for a money judgment for the post bankruptcy assessments that have come due since 2008. Sound far fetched?? It’s not and has happened several times to people who filed Chapter 7 or Chapter 13 in Jacksonville. Don’t let this happen to you!! Learn about your rights and the appropriate steps to take to protect yourself from this type of situation.

CONTACT US

At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.

Bryan Mickler