Are Condominium Dues and Association Fees Dischargeable in Bankruptcy?

by: Jonathan Goldsmith Cohen
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The short answer is yes. Condo dues and association fees can be discharged in bankruptcy. However, it is important that you understand in detail what obligations remain after a Chapter 7 or Chapter 13 Bankruptcy filing. As always, contact me with any questions. I look forward to hearing from you!

Chapter 7 Bankruptcy and Condo Dues

In a Chapter 7 Bankruptcy, pre-petition condo dues and association fees (from this point forward I will say condo dues but understand that the same rules apply to association fees) are dischargeable. So, for example, if prior to a Chapter 7 filing, $4,000.00 of back dues are owed, they would be forgiven in a Chapter 7 Bankruptcy. However, in a Chapter 7 Bankruptcy, after the petition is filed, you are responsible to resume making your regular dues payment. This responsibility exists whether or not you continue to live in the property or have vacated the premises. The obligation to pay monthly post-petition condo dues terminates under the following circumstances: sheriff’s sale, deed-in-lieu of foreclosure, short sale, or a conventional sale. If post-petition condominium dues payments are not resumed after a case is filed, it is common in New Jersey to see the association sue the homeowner and get a judgment against them for unpaid post-petition dues, late fees, and legal fees. In short, resume making your association dues payment after your bankruptcy is filed!

Chapter 13 Bankruptcy and Condo Dues

In a Chapter 13 Bankruptcy, pre-petition dues are dischargeable. If you are still living in your condo or apartment, the post-petition obligation to make association due payments arises as it does in a Chapter 7 Bankruptcy case as outlined above. Currently, litigation in New Jersey is ongoing to determine whether or not post-petition dues are dischargeable in a Chapter 13 when the property has been vacated. For the time being, again, resume making your regular dues payment post-petition!

Duly Recorded Condo Liens and Bankruptcy

Condo Liens and Real Property (Real Estate)

If your condo association has recorded a condo lien against your property, dues are discharged against you personally but not against the property itself. A condo lien is a judgment entered against your property for back condominium dues. Condo liens are not dischargeable in any Chapter 7 or Chapter 13 Bankruptcy, nor can they be stripped or removed from the property in a bankruptcy. The only way the lien can be removed is through sale of the property or paying the lien off. If a Chapter 13 Bankruptcy is filed and there are liens against a condominium, in order for the Chapter 13 Bankruptcy to be confirmed (be approved by a bankruptcy judge), the condo lien must be paid in full through the Chapter 13 Plan over 36 to 60 months.

Condo Liens and Personalty (Personal Property)

In a Chapter 7 or Chapter 13 case, a condo association cannot try to collect pre-petition dues from you personally. An association cannot levy your bank account, garnish your wages, or seize any other personal property to satisfy pre-petition condo dues obligations.