Can You Still Rent if You Have Already Filed for Bankruptcy?

By Beverly Bird

Bankruptcy is a double-edged sword. On one hand, it relieves you of responsibility for debts you're unable to pay. On the other hand, it's likely to complicate your life for years to come. Your credit score will suffer and lenders may be reluctant to enter into a contract with you. Although it may be difficult for you to qualify for a mortgage for a while, bankruptcy typically doesn't stop you from renting again after your discharge. It won't be quite as easy to find a willing landlord as it was before, but you don't necessarily have to give up your home when you file.

The Automatic Stay

As soon as you file for bankruptcy, an automatic stay goes into effect. If you're behind with your rent on your current apartment when you file, there's not much your landlord can do about it, at least not immediately. He can't evict you. If he's begun eviction proceedings, he must pause the process for 30 days. You have 60 days from the date of your bankruptcy filing to decide whether you want to stay in your rental or walk away from it. If you decide you want to keep your rental even though your landlord began eviction proceedings before you filed for bankruptcy, you must file an objection to stop the court from allowing your landlord to move ahead with the eviction after his 30-day stay expires. You must also make your current rent payments on time during this period.

Rejecting the Lease

If you decide that you don't want to keep your rental, you have the option of rejecting the lease as part of your bankruptcy proceedings. If you give up the apartment and move out, any further obligation to your landlord is discharged as part of your Chapter 7 proceedings. If you don't make a decision before the 60 days expires, you'll lose the chance. This automatically rejects your lease; you can't continue renting there and must move.

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Assuming the Lease

Assuming your lease means you want to stay put. You can continue to reside in the dwelling, and no one can force you to move. To exercise this option, you must immediately pay any past due rent you owe and be able to demonstrate to the court that you'll be able to continue making your rental payments going forward. Unless your landlord consents to a change in the terms of your lease, it would continue on as before.

Chapter 13

If you file for Chapter 13 bankruptcy instead of Chapter 7, this involves entering into a three or five year repayment plan to satisfy your debts. Each month, you'll give your disposable income to your bankruptcy trustee, after you've met your necessary living expenses, and the trustee will give this money to your creditors. You still have the option of rejecting or assuming your lease in a Chapter 13 bankruptcy, up until the time your repayment plan is confirmed or approved by the court. You must also state in your proposed repayment plan that you want to reject the lease or continue with it. Your ongoing rental payments would be part of your necessary living expenses. If you owe past due rent, you can include this as an unsecured creditor claim in your bankruptcy plan, paying it off over three or five years.

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Will I Receive Notice to Vacate After a Bankruptcy Is Discharged?

References

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What Happens if the Trustee Abandoned an Asset?

The word "abandon" sounds alarming, but it can actually be a good thing in a Chapter 7 bankruptcy. When your trustee decides to abandon an asset, it means he's not going to exercise his right to sell it and use the proceeds to pay off your creditors. This typically happens when assets are encumbered by loans, or when an asset doesn't have much resale value. In either case, the asset wouldn't bring in much money, so a trustee might decline to force the sale.

Defaulting on Chapter 13

Chapter 13 is called a wage earner's bankruptcy for a reason -- you need enough disposable income each month after paying your living expenses to fund a repayment plan through the bankruptcy trustee. You must give him your extra money each month for three to five years, and he apportions it among your creditors. In exchange, your property is not subject to liquidation. If you fail to make your payments to the trustee, however, you could find yourself right back in the situation you were in before you filed for bankruptcy protection.

Bankruptcy & Lease Rejection

Leases form a legal agreement between two parties, both of whom agree to do something under the terms of the contract. The lessor provides property for the lessee's use, and in exchange, the lessee makes periodic payments. In personal bankruptcy, the property is typically real estate or an automobile, and special rules determine what becomes of the contract when you file for Chapter 7 or Chapter 13.

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