Published On: March 26, 2014

Homeowners’ association received special treatment in bankruptcy.

Depending on your situation it is possible that both federal and state law comes into play.

Do you have a homeowners association?  Do you want to know your obligations and rights?  First, read the Conditions, Covenants and Restrictions “CC&R’S” to determine your liability (you signed these when you purchased the home). Most likely you are personally liable for the dues/assessments and the dues/assessments are liens on your property.


The first question to ask yourself is “am I keeping or surrendering the property”?

Make sure to understand your options when asking legal questions about keeping or surrendering your property.


Here is an example: You live in a condo in Phoenix. You pay $300 a month for HOA dues/assessments. Unfortunately, you are behind in your payments for the last 3 months. This means you owed $900, plus interest and fines (as provided by the CC&RS). You just received notice that the HOA has assessed a $1,500 special assessment for the repairs to the common area; to be paid in three installments of $500 each over the next 6 months. The first payment is due immediately.

Let’s start the discussion with the premise that you want to keep the condo.

Therefore, you need to make arrangements to pay the debt, including the fines provided by the CC&R’s. But, your neighbor told you that you could file bankruptcy and eliminate those dues. This is partially true, but there are several twists and turns. Filing bankruptcy be a solution to your problem, but only a chapter 13. That type of bankruptcy will allow you to pay the HOA arrears over time, while you continue to pay all new dues/assessments current as they come due.

What your neighbor did not understand is that Arizona statutes provide that an automatic lien exists for any unpaid dues/assessments. So, even if the dues/assessment was due and payable before the date the bankruptcy was filed, the lien would still attach to the condo. Thus, your personal obligation may be discharged, but there will still be a lien on the condo. The lien only lasts for 3 years, but the HOA can foreclose on the lien at any point prior. So, if you want to keep the condo you have to pay the assessment, or risk a foreclosure.

Now we change your answer to not wanting to keep the condo.

Depending on the CC&R’s both your and your property are “liable” for the debts so long as you own the condo. If you file a bankruptcy, the assessments, fines and interest that accrued before the filing ofhomeowners' association the bankruptcy will be discharged (the HOA cannot pursue you personally, but can foreclose on the condo). The problem is you still own the condo until the lender completes the foreclosure. So if you file for bankruptcy before the foreclosure is completed then under the bankruptcy law (11 U.S.C. 523(a)(16)) you are responsible for the new dues/assessments that arise after the date your bankruptcy was filed. Therefore, it is best to file your bankruptcy after the foreclosure is complete and the condo is no longer in your name.

Back to the fact pattern above. If you intend on surrendering the condo, the first part of the special assessment will be discharged in your bankruptcy. But all the dues/assessments, including the the next two installments of the special assessment, after filing your bankruptcy are still your responsibility. If you did not pay this before the foreclosure completes and legal title transfers, the HOA can sue you, and collect on any judgment obtained.



Musings by Diane:

Do not depend on your neighbor or work mate for answers to legal questions, unless they are licensed attorneys.  Law, like medicine, revolves around a person’s unique situation.  Hire someone experienced in the specific area of law or medicine where you need help.

Do not assume that a lawyer is licensed; check them out with the State Bar of Arizona.  Also look at their on-line reviews.

  • “Suggestions on How to Hire an Attorney”
  • “Why Do I Offer Free Legal Advice?”


By |Published On: March 26th, 2014|Last Updated: May 29th, 2022|

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