Excellent post and I’m sort of on the same page as you. However, that house was a super-appreciating asset. At some time between 2015 and 2018, they could’ve sold the place, paid down debt, and moved into an apartment with a decent credit score. 2014 valuation 376k. 2015 valuation 444k. 2016 valuation 444k. 2017 valuation 485k. 2018 valuation 485k.
I was shopping for houses in northern Colorado, Frederick/Firestone/Erie on up north to Fort Collins in 2016 -2017. Prices just kept rising with people bidding up. Based on my experience, their house would’ve been bid up to over 500k in 2017, 2018.
I see no financial strategy with not paying HOA dues, since Colorado is a superlien state. They had the ability to regroup after the BK and sell the darn place and either downsize, rent a house, or rent an apartment. All of this would’ve salvaged and rebuilt their credit score.