Avoiding Homeowners Association Liability Through Chapter 13 Bankruptcy


Homeowners associations have become a problem for many people because the assessments continue to accrue as long as the owner owns the house.  Florida law specifically provides that the homeowner is personally liable for the assessment, and that the assessment can also be attached to the property as a lien.

The general rule is that as long as the deed is in the homeowner’s name, he owns the property and he is liable for the assessments.  It is a common misconception that surrendering land in a bankruptcy rids one of any ownership interest in the property.

Henry E. Hildebrand, III, Chapter 13 Trustee for the Middle District of Tennessee, recently wrote a well-reasoned article on www.considerchapter13.org.  Hildebrand describes a case where the chapter 13 bankruptcy debtor successfully included a provision in the plan vesting (or transferring) the bank with the property’s ownership rights upon confirmation of the plan. 11 U.S.C. § 1322(b)(9) specifically provides that a plan can “provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity[.]”  Hildebrand points out that the court relied on the fact that the debtors gave the bank plenty of notice and that their plan clearly showed the debtors intent to both surrender the property to the bank and vest the ownership rights in the bank upon confirmation of the plan.

Section 1322(b)(9) can be a valuable tool for a homeowner who wishes to simply get rid of real property.  It allows the homeowner to have a say in determining when the property goes back to the bank, by forcing the bank to immediately object to the plan if the bank does not want to own its collateral upon confirmation of the plan.

If you are currently behind on your homeowners association dues and would like additional information regarding bankruptcy, please contact the Orlando bankruptcy attorneys at Cleaveland & Cleaveland, P.L at (407) 893-5200.