Foreclosure does not end association fees
When Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the intent was to make it more difficult to file for bankruptcy and to prevent people from taking advantage of the system. However, that new law came with many lesser-known regulations which have proved harmful for Georgia residents who legitimately need bankruptcy to deal with insurmountable debt.
One example of such a regulation relates to homeowners association fees. Until 2005, a homeowner who had allowed their home to fall into foreclosure saw those fees eliminated in a bankruptcy as soon as they vacated their home. Now, however, debtors remain liable for association fees for as long as they legally own the home, regardless of whether they are living in it or making the mortgage payments.
Therefore, until the foreclosure process is complete, the homeowner must continue to pay association fees for homes they no longer live in and can no longer afford. Although this has been the law since 2005, it has only become an overwhelming liability in recent months as the average length of a foreclosure has dramatically increased.
In the first quarter of 2011, the average length of a foreclosure was approximately 400 days from beginning to end. This has more than doubled from the first quarter of 2010, when the average length was just under 200 days.
This means that homeowners who have resorted to bankruptcy and foreclosure as a way to resolve their debt and get a fresh start must continue to pay association fees for over a year as they wait for the bank to conclude their foreclosure. Clearly, this is not possible for many. Hopefully, Congress will see the error in this law and change it in the near future.
Source: The Tennessean, “Foreclosure, bankruptcy won’t end homeowners association fee,” Brandon Gee, 17 May 2011