Bankruptcy and the Effects on Your Rental Housing Situation

This article explores the effects of bankruptcy, particularly the automatic stay and the discharge of past-due rent, on your rental housing circumstances.

The Automatic Stay and Eviction Actions:

When an individual files for bankruptcy, an automatic stay is immediately triggered. The automatic stay is a powerful legal provision that halts most collection efforts, including eviction actions. If you are facing eviction due to non-payment of rent or other lease violations, filing for bankruptcy provides a temporary reprieve, allowing you to remain in your rental property while the bankruptcy case proceeds.

The automatic stay halts ongoing eviction proceedings, suspending any court actions or attempts by landlords to remove tenants from the property. However, it's important to note that there are exceptions to the automatic stay for certain eviction situations, such as cases involving endangerment, illegal activities, or drug-related issues. Additionally, if the landlord obtains a court order for eviction before the bankruptcy filing, the automatic stay may not apply.

Assuming or Rejecting the Rental Contract:

Upon filing for bankruptcy, you have the option to assume or reject your rental contract. Assuming the contract means that you intend to continue fulfilling the terms of the lease, including the payment of ongoing rent. By assuming the contract, you can retain your rental housing and continue residing in the property, provided you meet the lease obligations moving forward.

On the other hand, you have the right to reject the rental contract during bankruptcy. Rejecting the contract terminates the lease, relieving you of any further obligations under the lease agreement. This allows you to vacate the rental property without facing the repercussions of ongoing rental payments.

Discharge of Past-Due Rent:

Bankruptcy can potentially discharge past-due rent, relieving you of the obligation to repay those outstanding amounts. However, it's important to note that the discharge of past-due rent depends on the bankruptcy chapter you file under and the specific circumstances of your case.

Under Chapter 7 bankruptcy, past-due rent may be eligible for discharge. This means that any rent owed up until the date of the bankruptcy filing can be eliminated. However, ongoing rent payments beyond the filing date are still your responsibility, and you must continue making those payments to remain in good standing with your landlord.

Chapter 13 bankruptcy offers a different approach. Instead of discharging past-due rent, Chapter 13 allows you to include the outstanding rent amount in your repayment plan to the extend necessary to adequately protect the landlord. This allows you to catch up on the arrears over a specified period while continuing to make ongoing rent payments.

Conclusion:

Bankruptcy can have a significant impact on your rental housing situation, providing temporary relief through the automatic stay and potential discharge of past-due rent. Understanding the implications of the automatic stay, assuming or rejecting your rental contract, and the discharge of rent are essential aspects to consider. Seeking the guidance of a knowledgeable bankruptcy attorney can help you navigate the complexities of bankruptcy law and determine the best course of action to address your rental housing situation effectively.