Ask a DC bankruptcy lawyer which debt causes the most trouble after a discharge and the answer is not the credit card or the car loan. It is the condo assessment. The Bankruptcy Code treats it differently from almost every other debt, and District of Columbia law gives the association a lien with more power than the bank's.
The dividing line is the filing date
Assessments that came due before you filed are unsecured claims. In Chapter 7 they are discharged. The association cannot sue you for them, cannot garnish you for them, and cannot report them as owed.
Assessments that come due after you file are a different animal. 11 U.S.C. § 523(a)(16) makes post-petition condominium and homeowners' association fees nondischargeable for as long as you or the trustee hold "a legal, equitable, or possessory ownership interest" in the unit. Every month you remain on title after filing, a new nondischargeable debt is born.
That rule does not matter if you are keeping the unit. You were going to pay the assessments anyway. It matters enormously if you are surrendering it.
The surrender trap
A Chapter 7 debtor who cannot afford a condo checks "surrender" on the Statement of Intention, stops paying the mortgage, receives a discharge, and assumes the matter is closed. It is not. The lender may take a year or more to foreclose in the District, and until the foreclosure sale records, the debtor is still the owner. Every assessment in that window is a nondischargeable personal debt, and DC associations pursue them.
Three ways out:
- Deed in lieu of foreclosure to the lender, recorded promptly. Title transfers; assessments stop.
- Deed the unit to the association if it will take it. Some DC associations will, particularly when the mortgage is small relative to value.
- Push the lender to foreclose. A discharged debtor has no reason to contest the foreclosure and a strong reason to see it finish.
Keep paying assessments until title actually moves. It is cheaper than the alternative.
The six-month super-lien
District of Columbia law gives a condominium association a lien for unpaid assessments, and under D.C. Code § 42-1903.13 the portion representing the six months of assessments immediately before a foreclosure has priority over the first mortgage. The D.C. Court of Appeals confirmed in Chase Plaza Condominium Ass'n v. JPMorgan Chase Bank, N.A., 98 A.3d 166 (D.C. 2014), that an association can foreclose on that priority portion and, if the lender does not protect itself, wipe out the first mortgage entirely.
For a debtor this has two consequences. First, a DC association has a credible foreclosure threat of its own and does not need to wait for the bank. Second, the lender will usually pay the six-month priority amount to protect its lien, and then add it to your mortgage balance. In a Chapter 13, that means the six months can show up as part of the mortgage arrears the plan has to cure.
Chapter 13: keeping the condo
If you want to keep the unit, Chapter 13 is the vehicle. The plan cures the assessment arrears over three to five years while you pay the current assessments directly to the association. The association's pre-petition claim is secured to the extent of its lien, and the lien is limited to the unit, so a plan that cures the arrears and stays current removes the foreclosure risk.
Post-petition assessments must be paid on time. A Chapter 13 debtor who falls behind on current assessments faces a motion for relief from the stay, and the association will get it.
Exemption note
DC's homestead exemption under D.C. Code § 15-501(a)(14) protects the equity in your residence without a dollar cap, and a condominium unit qualifies. That exemption protects equity from the trustee. It does not protect you from the association's lien, which attaches to the unit itself. See The DC Homestead Exemption.
Frequently asked questions
The association's attorney says legal fees were added to my account. Are those discharged? Attorney's fees and late charges assessed before the filing date are part of the pre-petition claim and are discharged in Chapter 7. Fees the association incurs after filing to collect post-petition assessments are treated like the assessments themselves.
I rent out my condo. Does § 523(a)(16) still apply? Yes. The statute requires only an ownership interest, not occupancy.
Can the association shut off water or bar me from the gym for unpaid pre-petition fees after I file? Not for pre-petition amounts. Using amenities as leverage to collect a discharged debt is a discharge violation, and using them to collect a stayed debt during the case is a stay violation. Document it.
The DC means test calculator sorts out whether Chapter 7 or Chapter 13 is available on your income, which is the first step in deciding whether the condo can be kept.