Can You Remove A Homeowners Assocation Lien from Your Home?
Many homeowners in California are facing growing problems in trying to not only keep up with their mortgage but their monthly homeowners association payments. In California, a homeowners association can exercise the right to place a lien on your home for past due HOA fees. A homeowners association can eventually foreclose on a property for past due homeowners association dues.
Are there any options available if your association has placed a lien on your home and is threatening to sell your home?
A homeowners association lien may be avoidable and removable as part of a Chapter 13 bankruptcy filing. If you can show that the homeowners association lien has no equity to attach to in your home then you may be able to remove the HOA lien in bankruptcy. An example of this occurs where your home is worth $350,000 and you have a 1st mortgage loan for $400,000. If you have a HOA lien for any amount there would be no equity available for the lien to attach to on your property. In a Chapter 13 bankruptcy you can avoid the lien and treat the pre-petition HOA lien as an unsecured creditor in your Chapter 13 bankruptcy.
Under Section 506(d) of the bankruptcy code an HOA lien could be treated as an avoidable pre-petition statutorily lien. This does not mean that you would eliminate your responsibility for paying post-petition HOA fees that become due after the filing of your bankruptcy case. The lien stripping would avoid and treat as unsecured debt only the pre-petition lien, but would not eliminate your monthly HOA fees that become due after filing.
Whether a lien from an HOA is removable in a Chapter 13 bankruptcy also depends on state law. There may be states where a lien from a homeowners association is given first priority over a mortgage loan. In these cases the homeowners association may have some equity to attach to and may not be treated as an unsecured debt. The overall priority of the HOA lien can affect whether the lien can be avoided under Section 506(d) of the bankruptcy code. In California, an HOA lien is give priority based on when the lien on the property is recorded. In most instances this will mean that it does not have priority over most mortgages. In addition some homeowners associations have tried to argue that the covenants and restrictions are actually a type of executory contract that is not subject to being removed. These arguments have generally failed for the most part.
Eliminating your pre-petition HOA lien can be a powerful tool in a Chapter 13 bankruptcy that can help you avoid foreclosure. If you are facing a potential foreclosure from a homeowners association, talk to an experienced about eliminating the lien and protecting your home in a Chapter 13 bankruptcy.