You have a legal obligation to pay your homeowners' association fees, which cover the costs of shared items, areas and expenses in your development. If you don't pay, the HOA can take action against you in court to recover the money. The longer you let a judgment sit, the more you'll have to pay, so you need to move quickly to avoid a ballooning debt.
The procedures for a homeowners' association to get a judgment vary by state. An association usually has to go to a local court with evidence of the owed fees — copies of your association account statements, for example — and notify you of the action. At that point, you can dispute the claim and ask for a hearing. If you lose at the hearing don't respond to the court, the HOA gets a judgment against you for the fees owed plus any court costs and legal fees allowed by state law.
A HOA may use a judgment to create a lien against your real estate, garnish your pay or freeze and take money from your bank account, depending on state law. A lien, usually created when the HOA files the judgment in the land records of your property's county, gives the association legal interest in your real estate until the judgment expires under state law. If you want to do anything with your property, such as get a new mortgage, before the judgment expires, you'll have to pay the judgment first. If your state allows the association to add interest to the judgment, you'll find yourself owing more than what was originally awarded. The debt goes up higher the longer it goes unpaid. A judgment is also reported on your credit reports, damaging your credit score and rating.
You can pay off the judgment in full and have the HOA file a satisfaction or discharge with the court and in the county land records if the HOA has a lien. The HOA should report the judgment as paid to the credit bureaus, but if not, you can dispute its "open" status on your report using the dispute method provided by the bureau. If you can't pay the judgment in full, you can contact the HOA and work out a payment agreement. The HOA may agree to take less than what's owed if you negotiate a debt settlement, but you'll need to get the terms of the agreement in writing. Even if you just work out a payment schedule for the full amount, you may be able to get the HOA to agree to stop any collection actions as long as you make the agreed payments on time.
You might be able to include a HOA judgment on a Chapter 7 or Chapter 13 bankruptcy. Chapter 7 involves the elimination of your debts, while on Chapter 13, you make a repayment plan with your creditors under court supervision. If you're keeping your home and the HOA has a judgment, the court may give the HOA secured creditor status, making the debt a priority and an item you must pay outside of bankruptcy. If the HOA judgment is for more than your equity — the percentage of the home's value you own free of other liens — you might be able to remove the lien during the bankruptcy process. You'll need to speak to a bankruptcy attorney before filing to determine what bankruptcy will do to your finances and the HOA judgment.
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