Bankruptcy and Apartment Leases in New York

Facing money troubles is incredibly stressful. You might worry about bills piling up, including obligations from a credit card or mounting card debt. You might also worry about keeping a roof over your head, especially when managing monthly payments for your home. If you rent an apartment in New York and are thinking about filing bankruptcy, you likely have many questions about how this will bankruptcy affect your apartment lease. Many people feel overwhelmed by the thought of bankruptcy and apartment leases in NY. You want to know how filing bankruptcy could impact your current living situation and your ability to make rental payments on your rental property.

This is a common concern, and it’s good you’re looking for answers about bankruptcy law. It’s a tough spot to be in, for sure. Knowing your rights and the processes involved when you file bankruptcy can give you some clarity. This information is designed to help you understand the basics of tenant bankruptcy. It is not legal advice, though, as every bankruptcy case is different, especially when experiencing financial difficulties that might stem from health care costs or student loan burdens. You should always talk to a qualified attorney for advice about your specific circumstances.

The Automatic Stay: A Pause Button for Landlords

When you file for bankruptcy, something called an “automatic stay” goes into effect. Think of it as an immediate pause button on most collection efforts. This powerful tool of bankruptcy law stops most creditors from trying to collect debts from you, halting debt collection activities. This automatic stay prevents landlords from taking certain actions, such as trying to evict you for non-payment of rent owed before your bankruptcy filing or initiating new eviction proceedings. So, if your landlord has started an eviction case for past-due rent, the automatic stay can temporarily halt it, providing critical breathing room. The stay prevents further action without court permission.

This protection is quite broad and is a fundamental aspect of the bankruptcy code. It applies whether you file Chapter 7 or file Chapter 13 bankruptcy. But, there are some important limits. For instance, if your landlord already has an eviction judgment of possession from a housing bankruptcy court before you file bankruptcy, the automatic stay might not apply, or its protections might be very limited. The U.S. Courts website explains that the stay arises by operation of law and requires no judicial action from the bankruptcy courts to take effect; it’s an immediate consequence of the tenant’s bankruptcy filing.

The automatic stay gives you breathing room and prevents eviction efforts temporarily. It does not solve all problems with your lease agreement, but it does give you time. This time can be used to figure out your next steps regarding your apartment lease and how you will pay rent moving forward. Violations of the automatic stay by a creditor or landlord can lead to sanctions, so it is a serious protection for debtors.

Your Apartment Lease: An Executory Contract

In bankruptcy, your apartment lease is generally seen as an “executory contract.” This legal term means it’s a contract where both you and your landlord still have significant obligations to perform under the lease agreement. You have to pay rent and adhere to other lease terms, and your landlord has to provide you with a habitable residential property and maintain it. Because it’s an executory contract, it gets special treatment in bankruptcy under the bankruptcy code. Section 365 of the Bankruptcy Code talks about these types of contracts and leases, detailing how they are handled in a bankruptcy case.

A bankruptcy trustee appointed by the bankruptcy court will be involved in your case. This trustee appointed plays a key role. They will look at your rental lease and, along with you (and your attorney), decide what to do with it. You generally have two main choices: to “assume” the lease or “reject” it. This decision has big effects on whether you can stay in your apartment and how any rent owed is treated.

Understanding that your lease generally falls under this category of executory contracts is important for knowing your rights. The decision to assume or reject must be made within a certain timeframe, typically 60 days after filing for Chapter 7, though this can be extended by the court. For Chapter 13, the decision is usually part of your repayment planconfirmation.

Chapter 7 Bankruptcy and Apartment Leases in NY

Chapter 7 bankruptcy, a common bankruptcy chapter, is often called “liquidation” bankruptcy. It usually involves selling certain non-exempt assets to pay creditors, though many filers have no non-exempt assets to lose. How does this bankruptcy affect your apartment lease in New York? You have choices here when filing Chapter 7. The process can seem challenging when dealing with Chapter 7 bankruptcy and apartment leases in NY, especially when also managing other debt issues like credit card debt or tax debt.

Choosing to Assume Your Lease in Chapter 7

If you want to stay in your apartment, you can ask to “assume” the lease agreement. This means you agree to continue honoring all its terms, which is crucial for your current rental situation. This includes paying rent on time going forward and addressing any past-due rent. But, there’s a catch if you’re behind on your rent payments.

To assume a lease, you typically must “cure” any defaults. This means you need to pay back any rent you owed quite promptly, often in a lump sum. You also need to show you can make future rent payments, providing what’s known as “adequate assurance of future performance.” Your landlord has the right to object if they don’t think you can catch up on the rent owed or continue making timely monthly payments in the future. Proving adequate assurance might involve showing steady income or, in rare cases, even having someone co-sign, though the latter is uncommon in lease assumptions.

If you’re current on rent and can keep paying rent rent timely, assuming the lease generally might be straightforward. If you’re behind, it’s more complicated. You’ll need a plan to pay the back rent quickly. The bankruptcy court ultimately approves or denies the request to assume the lease, after considering any objections from the landlord. If successful, your credit score might positively reflect timely payments on the assumed lease over time.

Choosing to Reject Your Lease in Chapter 7

Maybe staying isn’t your goal, or your current rent is unaffordable. Perhaps the rent is too high, the rental property no longer meets your needs, or you want a fresh start somewhere else. In this case, you can “reject” the lease. When you reject lease agreements in bankruptcy, you’re essentially ending your obligations under it.

If you reject lease documents, you’ll have to move out, typically by an agreed-upon date or as ordered by the bankruptcy court. The significant benefit is that any past-due rent you owed before filing bankruptcy can usually be discharged. This means that specific rent discharged is a debt you will no longer be legally obligated to pay. However, you’re responsible for rent for the time you live there after filing bankruptcy until you vacate the residential property.

Rejecting the lease can free you from a heavy financial burden associated with unaffordable rental payments. But it means finding a new place to live, which can also be challenging, especially with a recent bankruptcy filing on your record. It’s a trade-off you’ll need to think about carefully, considering the real estate market for prospective tenants.

Chapter 13 Bankruptcy: A Path to Catch Up on Rent

Chapter 13 bankruptcy, another bankruptcy chapter option, is different from Chapter 7. It’s a reorganization plan where you make payments to creditors over three to five years, a process that involves repayment. This option can be very helpful if you’re behind on rent payments but want to stay in your New York apartment. Many people find Chapter 13 a useful tool for managing their bankruptcy and apartment leases in NY, particularly if they have a steady income but need time to manage debt issues, including rent owed.

With Chapter 13, you can propose a repayment plan to catch up on your back rent owed over the life of the plan. This is a big advantage. Instead of needing all the back rent money at once, like in Chapter 7, you can spread it out into manageable monthly payments. You must, however, continue to pay your regular monthly payments for your current rent on time as it comes due after you file Chapter 13. The Chapter 13 bankruptcy basics highlight this structured repayment approach, which can also include payments towards other obligations like credit card debt, student loan amounts, or tax debt.

Your landlord can still object to your proposed repayment plan. They might argue it’s not feasible or doesn’t adequately protect their interests. But, if the bankruptcy court approves your plan, you get to stay in your rental property as long as you make all your payments. This includes current rent payments directly to the landlord and your Chapter 13 plan payments to the trustee appointed for your bankruptcy case.

Here’s a comparison to help understand the lease options in Chapter 7 and Chapter 13:

Feature	Chapter 7 Bankruptcy	Chapter 13 Bankruptcy
Goal for Lease	Assume or Reject the lease agreement	Assume or Reject the lease agreement
Handling Past-Due Rent	Must be paid in a lump sum relatively quickly to assume and cure the past-due rent.	Can be paid over the 3-5 year repayment plan to cure the past-due rent.
Keeping the Apartment	Possible if current on rent or can cure arrears immediately and show future ability to pay rent.	Often more feasible if behind on rent due to the extended time to cure arrears while paying rentcurrently.
Discharge of Lease Debt	If lease is rejected, future obligations and most pre-petition rent owed can be discharged.	Debt for a rejected lease is treated as a general unsecured debt, often paid pennies on the dollar or nothing.
Duration of Bankruptcy Case	Typically 3-6 months.	Typically 3-5 years.
Primary Benefit for Lease Issues	Provides a quick fresh start if rejecting the lease; rent discharged helps financially.	Offers a structured path to cure rent arrears and keep the apartment by continue making payments.

What If Your Landlord Objects to You Staying?

Landlords are not always happy when a tenant files for tenant bankruptcy. This is especially true if rent owed is substantial. If you want to assume your apartment lease, your landlord, or the landlord file an objection, can object through the bankruptcy court. They might say you haven’t properly cured defaults on rental payments. Or, they might argue you haven’t given adequate assurance of future performance for the current rental agreement.

For example, “adequate assurance” could mean showing a stable income source sufficient to cover current rent and other living expenses. It might also involve demonstrating that the circumstances leading to the prior bankruptcy filing (if any) or current debt issues have been resolved. The exact requirements can depend on your specific lease agreement and the landlord tenant laws applicable in your area. The New York State Unified Court System provides information for tenants, although a bankruptcy filing adds another layer to landlord tenant disputes.

If your landlord objects, the bankruptcy judge in the bankruptcy courts will decide. You’ll have a chance to present your side and argue why you should be allowed to assume the rental lease. Having good records of your income, a clear plan to continue making rent timely, and the assistance of an experienced bankruptcy attorney are really important in these disputes.

Post-Petition Rent: This is Super Important.

This is a point that many people miss, and it’s critical for anyone filing bankruptcy while renting. Rent that becomes due after you file for bankruptcy is called “post-petition” rent. This current rent is not dischargeable in your current bankruptcy case. You must pay it if you want to stay in your apartment and maintain your current rental agreement.

If you assume your lease agreement, you are promising to pay all future rent according to its terms. If you fall behind on post-petition rent payments, your landlord can ask the bankruptcy court to “lift” the automatic stay. If the court agrees, your landlord can then move forward with eviction proceedings, potentially leading to an eviction judgment. This is true even if you’re in a Chapter 13 repayment plan designed to handle past-due rent.

Keeping up with post-petition rent and paying rent on time is perhaps the most important thing you can do if you want to keep your apartment during bankruptcy. Failure to do so jeopardizes your housing regardless of the protections offered by the bankruptcy filing. Your trustee appointed may also scrutinize your ability to manage post-petition expenses.

Rent-Stabilized and Rent-Controlled Apartments in NY

New York City, and to some extent other areas like parts of Nassau County, has many rent-stabilized and rent-controlled apartment units. These leases often have strong protections for tenants. How does bankruptcy affect these? Generally, these leases are treated like any other executory contracts in bankruptcy. You still need to decide whether to assume or reject the lease agreement through the bankruptcy court.

The benefit of a rent-stabilized apartment or rent-controlled apartment (like lower rent and renewal rights) is considered an asset in your bankruptcy estate. However, it’s an asset you can usually keep by assuming the lease and staying current on rent payments. The desire to keep a rent-controlled apartment can be a big reason someone chooses to file Chapter 13. This bankruptcy chapter allows them to cure arrears on rent owed over time while paying rentcurrently.

If you have such a lease, talk to a bankruptcy attorney who understands NYC housing laws and local rent regulations. The intersection of bankruptcy law and local rent regulations can be complicated. It is crucial to handle this situation carefully to protect your rights to an affordable residential property.

What if My Landlord Already Started Eviction?

The timing of your bankruptcy filing matters a lot if an eviction case or eviction proceedings are already underway. If your landlord has started eviction proceedings for non-payment of rent, the automatic stay usually stops it, prevents eviction temporarily. However, if your landlord has already gotten a judgment for possession prior to your bankruptcy filing (an eviction judgment) from the housing court before you file bankruptcy, the situation changes significantly. The automatic stay prevents many actions, but it might not stop the eviction at all in this specific scenario or may offer very limited protection if there was a prior bankruptcy filing with certain outcomes.

There are some very limited exceptions if you are facing eviction with a judgment already in place. Under federal law and New York law, you might be able to stop the eviction. This typically involves paying all the back rent owed to the landlord within 30 days of filing bankruptcy. You also have to file a certification, often an official form, with the bankruptcy court clerk stating that you have paid the deposit and can cure the entire monetary default. This is a very complicated area of bankruptcy law. You need immediate legal advice if you have an eviction judgment against you, especially if there was a prior bankruptcy involved.

Don’t wait until the marshal is at your door. The earlier you act, the more options you might have. Waiting too long can seriously limit your ability to save your tenancy through a tenant’s bankruptcy filing or any tenant bankruptcy process. The landlord file for relief from stay quickly if they have a pre-petition judgment.

Security Deposits and Bankruptcy

What happens to your security deposit if you file for bankruptcy? Usually, a security deposit remains the landlord’s property, held in trust for you as per your lease agreement. If you complete your lease term and leave the rental property in good condition, you’re entitled to its return. Bankruptcy generally doesn’t change this, especially if you assume the lease and stay current on all rental payments.

If you reject lease terms and owe rent owed or damages to the residential property, the landlord can use the security deposit to cover those amounts. If the deposit is more than what you owe, you might get some back from the bankruptcy estate if it was recovered by the trustee, or directly from the landlord. If it’s less, the remaining debt (if it was pre-petition rent owed) could be discharged in your bankruptcy case. Discuss this with your attorney, as state laws like those enforced by the New York Attorney General’s office also govern security deposits and landlord tenant rights.

The security deposit is technically part of your bankruptcy estate when you file, but exemptions often protect your interest in it, particularly if you intend to continue the lease. If there’s a dispute over the security deposit, the bankruptcy court might get involved. Always ensure your privacy policy understandings with your attorney cover how such assets are listed in your bankruptcy petition.

Practical Steps to Take

If you’re thinking about filing bankruptcy and worried about your New York apartment lease, here are some practical things to do:

• Gather your documents. Find your lease agreement, any notices from your landlord regarding rent payments or an eviction case, and records of your rental payments.
• Assess your situation honestly. How far behind are you on rent owed? Can you afford the current rent going forward? Understanding your overall debt issues, including credit card debt, student loan obligations, or tax debt, is crucial.
• Understand your lease agreement terms. What does it say about default, past-due rent, or early termination?
• Do not ignore communications from your landlord. But, be careful what you say or agree to without legal counsel, especially if facing eviction.
• Consult a qualified bankruptcy attorney in New York. This is the most important step. They can explain your specific options concerning your bankruptcy and apartment leases in NY, help you understand different bankruptcy chapter choices, and assist with the official form known as the bankruptcy petition. An experienced bankruptcy lawyer can also discuss broader issues like foreclosure defense if you own other real estate.
• Be prepared to discuss your entire financial situation, including any health care debts or other significant financial burdens that led to considering filing bankruptcy.
• Discuss how prior bankruptcy filings, if any, might affect your current bankruptcy case and options for your apartment lease.

An attorney can help you make the best decision for your situation. They can guide you through assuming or rejecting your rental lease. They can also represent you in bankruptcy court if your landlord objects or if debt collectionattempts continue improperly.

Discrimination After Bankruptcy?

You might worry if filing bankruptcy will make it hard to rent an apartment in the future and how it will bankruptcy affect prospective tenants. The Bankruptcy Code has a rule against discrimination by governmental units. For example, a public housing authority generally cannot deny you housing just because you file bankruptcy and have a bankruptcy filing on your record. Private landlords, however, operate under different rules when it comes to assessing prospective tenants for their rental property.

Private landlords can check credit reports. A bankruptcy filing will show up on your credit score and report for several years (up to 10 years for Chapter 7, and typically less for a completed Chapter 13). Some landlords might be hesitant to rent to someone with a recent tenant bankruptcy on their record. But, many landlords also look at your current income and rental history after bankruptcy. Showing you’ve managed your finances well since filing bankruptcy, are paying rentrent timely in any subsequent rentals, and have stable employment can help improve your chances in the competitive real estate market.

It’s not always easy, but people do find new apartments after bankruptcy. Having a stable job, good references, and perhaps offering a slightly larger security deposit (if permissible and affordable) can make a big difference. Transparency about your prior bankruptcy and how you’ve recovered financially can also be beneficial when dealing with prospective tenants screenings.

Conclusion

Figuring out your options for bankruptcy and apartment leases in NY can feel like a significant burden, especially when you are already dealing with the stress of debt issues. The automatic stay offers temporary protection and prevents landlords from immediate action. Your lease agreement is an executory contract that you can assume or reject, a decision heavily influenced by whether you file Chapter 7 or Chapter 13. Chapter 7 offers a quicker path for those wishing to reject lease agreements and get rent discharged, while Chapter 13 provides a repayment plan which involves repayment of past-due rent over time, often making it easier to keep your home.

Remember, paying rent that comes due after your bankruptcy filing (post-petition rent payments) is vital if you wish to stay. The rules around an eviction judgment obtained possession prior to filing are strict, and issues concerning your security deposit or a rent-controlled apartment add further layers. Navigating bankruptcy law as it pertains to your apartment lease requires careful consideration of your current rent affordability and long-term housing goals.

Getting good legal help from an experienced bankruptcy attorney is essential to make informed choices. They can guide you through the bankruptcy petition process, explain how bankruptcy affects your specific lease agreement, and help you aim for the best possible outcome for your housing situation when dealing with bankruptcy and apartment leases in NY. An attorney is your best resource to understand your rights and obligations when you file for bankruptcy. Schedule your free consultation today with The Law Office of William Waldner.