debt

Homeowners dues after a bankruptcy filing

Justin HarelikQuestionDear Bankruptcy Adviser,
I filed for bankruptcy in December 2010 and gave the house back to the banks. They have not taken over the deed even though Wells Fargo gave notice of foreclosure in January 2010 and notice of auctioning off the house in February 2010. I am still responsible for the homeowners association dues because I am still owner of the deed. What can I do to get the bank to take over the deed?
-- Ken

AnswerDear Ken,
This may come as a shock, but your situation is not all that uncommon.

You say that you gave the house back to the bank in your bankruptcy. While it is true you listed your intentions were to "surrender" the property, this does not create a mechanism for the bank to take back the property. The bankruptcy did eliminate your financial liability, but the bank must still foreclose on the property to remove your name from the title and eliminate your property ownership.

You're at the mercy of the banks, and the process can move very slowly. I have seen this most strikingly when Countrywide was the original lender. Those loans were taken over by Bank of America and have not been processed for foreclosure yet, allowing some homeowners to remain in their homes for up to four years without making a mortgage payment. That is correct -- four years!

More importantly for you now, you are still responsible for the homeowners association, or HOA, dues. You did successfully eliminate any HOA dues owed prior to your December 2010 bankruptcy filing, but you are liable for any post-filing dues. I tell all my clients with HOA dues they must make those payments after filing for bankruptcy. Almost all listen. The occasional one does not, and I have seen a few clients sued for HOA dues after a bankruptcy filing.

I hope you are still living in the property. If so, then just consider the HOA dues to be a very low monthly rental payment. You are helping out the other members of the association cover necessary monthly HOA expenses. At the same time, you are not paying the mortgage, property taxes or insurance. This is a pretty good deal.

If you have moved out, you still have to pay the HOA. Maybe you can find a friend or family member who needs temporary housing. That person can pay the dues while maintaining the property until the bank eventually forecloses.

You could try to short sell the property. In a short sale, you sell the property for less than what is owed. There are literally thousands of mortgage brokers or salespersons who would take the listing to sell the house for you. And you would not have to pay anything to anyone, nor would selling the property impose any new liability for the mortgage loan. Since you are still the owner, you have the right to sell the property.

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