The neverending cycle: bankruptcy and homeowner/condominium association dues

When the economy took a dive in 2007 taking the housing market with it, hundreds of thousands of Americans, walked away from homes and condominiums and declared bankruptcy to get out from under unmanageable debt.

But what about those homeowner association and condominium dues? Who is responsible for those? Common sense might lead you to think that the bank that holds the mortgage would be on the hook for association dues, too.  After all, the home was “given back” to the bank… wasn’t it?

Well… Not so fast. Under bankruptcy law, the owner of the house or condo remains personally liable for all homeowner association and condominium dues that accrue after the bankruptcy was filed and before legal title passes from the owner to the bank.  Due to a glut in inventory, many banks have been slow to actually take title to the property from the former borrower, and until they do, condominium association dues and fees owed continue to tick up.

To make matters worse, the homeowner or condominium association has four years to file a lawsuit against the owner under Georgia law, O.C.G.A. §9-3-29. If the association files the lawsuit before the expiration of those four years, the dues and fees continue to accrue during the lawsuit, assuming the bank does not successfully foreclose on or sell the property, causing legal title to transfer from the owner.

The result can be a perfect storm for a property owner, who, after discharge from bankruptcy, may once more be facing a judge with thousands of dollars in past-due association fees and dues and very limited options for relief, if any, from a potentially unbearable debt.

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