Updated: Oct 22, 2021
Behind on your monthly HOAs, late fees or special assessments owed to your homeowner’s association?
Under Minnesota statute, most defaulted amounts due to a homeowner’s association create an automatic lien against the individual unit, which means that these amounts remain secured against the condo or townhome even after bankruptcy. Because of this statutory lien, the association can collect against a defaulting owner either by way of initiating a lawsuit for personal liability or, less frequently, by foreclosing its lien.
Read more about Condo, Townhome and HOA Association Liens in Minnesota.
While bankruptcy typically discharges one’s personal liability for unpaid assessments as of the date the bankruptcy is filed, the automatic association lien that is created by statute still exists in spite of bankruptcy. Therefore the association retains a right to foreclose the unit either after a bankruptcy discharge is received or during bankruptcy with court approval. Because filing of bankruptcy only offers temporary relief for a defaulting condo or townhome owner who wishes to retain the property, a long term resolution of the association arrears is necessary.
Chapter 13 bankruptcy allows a defaulting homeowner as long as three to five years to repay their association for any “pre-petition” amounts due. While in chapter 13, the homeowner must stay current on the monthly HOAs and any new special assessments or they again will risk an association foreclosure of the unit for “post-petition” amounts due.
Chapter 7 bankruptcy discharges personal liability for unpaid association assessments / HOAs but will not resolve the automatic lien if the homeowner intends to keep the property.
There are options in bankruptcy if you are behind on assessments due to the association and these options vary depending on whether you intend to keep the property. If you own a condo or townhome and are considering bankruptcy to stop a foreclosure or lawsuit, it’s important to understand how bankruptcy may impact your liability for association dues, fees and other assessments, your right to continue to use common amenities, and the risks of foreclosure. Especially under these circumstances, it’s best to get advice from a bankruptcy attorney who understands the various forms of bankruptcy relief to protect your interests with regard to the property.
Attorney Lynn Wartchow is a Minneapolis / St. Paul area bankruptcy attorney representing clients in Chapter 7 and Chapter 13 consumer bankruptcy proceedings in Minnesota since 2005.Call for a free bankruptcy consultation to understand your options in Chapter 13 or Chapter 7 bankruptcy.