Bankruptcy Court Says Ongoing HOA Assessments are Dischargeable

US Bankruptcy Court decision (September 25, 2014):

In this case, the owners of a condominium located within a common interest community stopped paying their mortgage and homeowners assessments and abandoned their property. They subsequently filed a Chapter 13 bankruptcy in which they proposed a plan that provided for transferring title to their condominium to the bank and which made no provision for paying their HOA ongoing assessments. The bank and the HOA objected to the confirmation of the Chapter 13 plan.

The bankruptcy court sustained the bank’s objection to the plan finding that a transfer of title to the condominium required an acceptance of the transferee by the transferee (bank). If the bank did not want to accept title, it could not be forced to take it.

The court did not sustain the HOA’s objections to the owners’ Chapter 13 Plan and confirmed the plain with respect to it not including payments of ongoing HOA assessments. The court relied on the language contained in section 1328(a) of the Bankruptcy Act, that a debtor may be granted a discharge of all “debts,” the court found that “debts” are defined as “liability on a claim,” which, in turn, is defined in section 101(5)(A) as “[a] right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” As such, the court concluded that “the claim against the property owners for association assessments arose prior to the filing of their bankruptcy and includes obligations for ongoing assessments. As pre-petition debts they were dischargeable under section 1328(a) and the exceptions set forth in section 523(a) are not applicable.

See case decision: BRYAN-CHARLES-COONFIELD-and-ANNETTE-ELIZABETH-COONFIELD-14-02533-FPC13