In a word Yes. But read on.
Yes, is not the end of the question. Past-Due Condo Association Dues Are Dischargeable in Bankruptcy. BUT, you will continue to owe dues and fees that are incurred after the bankruptcy for as long as you remain in title to the house.
Many people are confused by the question: Are Condo Association Dues Dischargeable In Bankruptcy? Condominium association fees pose a special difficulty in Chapter 7 or Chapter 13 bankruptcy, given the deflated values of many condos in this real estate market, the intent of many condo owners to surrender and safely walk away from terribly underwater condominium properties through the tax-free and collection-free bankruptcy process, and the slowness new of mortgage-holding banks in foreclosing on surrender condominium properties in New Jersey.
The “special difficulty” is with regard to the condominium association fees and dues that come along with the ownership of such properties. First: a bankruptcy surrender of real estate does not “quitclaim” the property back to the mortgage-holding banks immediately. A New Jersey law-based foreclosure is required for the title to transfer from the individual filing the bankruptcy back to the bank after the bankruptcy. Second: while the bankruptcy discharges the filler’s obligation to pay all past-due fees and dues, it does not have any effect on all post-filing dues and fees that become due and owing and continue to become due and owing each and every month until the filer no longer holds title to the property.
Past-due association dues and fees are discharged by a bankruptcy just like any other unsecured debt. However, condominium associations (and homeowners’ associations in planned subdivision situations) have litigated the issue of continuing association fees aggressively in the bankruptcy courts, and they have largely come out ahead on this question.
What does all of this mean?
Even If Surrendering the Condo, Dues Must Be Paid from Date-of-Filing of the Bankruptcy Petition until the property is transferred to another owner or back to the bank.
A homeowner must continue to pay the association fees so long as they remain the titled owner of the property—even after a surrender of the property in bankruptcy.
It is worth repeating for clarity: Bankruptcy will discharge all association fees incurred prior to the date of the filing of the bankruptcy petition BUT the homeowner will be liable for association fees from the date of filing forward, on through the completion of a full foreclosure process by the note-holding bank. In New Jersey, this can mean several months to a year or more of continuing responsibility for these fees, even after a bankruptcy. This is because, until a full foreclosure process as required under New Jersey state law is completed, the surrendering homeowner remains the titled owner of the property.
A full foreclosure process includes a “redemption period” following the foreclosure Sheriff’s sale of the property, generally. If you are not in foreclosure at the time you file your Chapter 7 or Chapter 13 bankruptcy in New Jersey, you can expect to remain the titled owner of the property and to be required to pay ongoing association dues for at least 12 months from the date of filing of your bankruptcy petition. During that period of time after a bankruptcy, you are not required to make any mortgage payment or pay any property taxes, BUT you MUST make your ongoing association dues payments (and keep the property insured, if that insurance payment is not drawn from the association dues, for your own liability protection).
If you are a New Jersey resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced New Jersey bankruptcy attorney, please contact us at or click the button to schedule a free, initial consultation.