Will I Lose my NYC apartment in bankruptcy?
People who live in New York City recognize the value of an apartment lease. Often people pay one or two months of rent upfront, plus a security deposit, before they can begin an apartment lease. The ability to come up with so much money can be just about impossible and often requires the help of friends or family. For this reason, if someone files for bankruptcy (a “debtor”), the stakes can be very high. If you have a typical lease and are current with your rent, you will keep your apartment without any issues when you file for bankruptcy. However, you may need to act strategically if you are behind on your rent or have a rent-stabilized apartment. This post will answer the following questions:
- Is my rent-stabilized apartment safe if I file for Bankruptcy?
- If I am behind on my rent, will I lose my apartment?
MY APARTMENT IS RENT-STABILIZED – CAN MY CREDITORS TAKE IT IN BANKRUPTCY?
As many New York City residents know, coveted apartments fall under various rent stabilization schemes, which allow a tenant to lease an apartment for a small fraction of the going rate as long as certain conditions are met. Now if the leaseholder files for bankruptcy, he or she MIGHT lose this amazing deal. Yes, unfortunately, that is where our state legislature has left us. But hold on, let’s look at the process in more detail and some possible solutions.
First, a person files for Chapter 7 bankruptcy. Second, there is a trustee, essentially an attorney in charge of distributing non-exempt property that the debtor owns, who tries to find something of value, i.e., any assets, to pay off the debts of the person filing for bankruptcy. In New York City, these trustees have become very clever at finding these assets. An asset is anything that has value and can be sold. In this case, the trustee may contact the debtor’s landlord and ask if money can be exchanged for the debtor to leave the rent-stabilized apartment. If the landlord says yes, the debtor will be evicted shortly after that in exchange for money that the trustee will get. Please note there are no exemptions to protect a rent-stabilized lease. The appellate court has held that it is not a public benefit, nor would a lease be able to be exempted using the homestead exemption.
There are some strategies to keep one of these stabilized leases. For starters, if someone else is listed on the lease, the debtor’s interest can be sold, but the other lessee would remain on the lease and avoid eviction. Similarly, if the debtor can match the funds offered for the lease, he or she can buy the lease from the trustee, essentially being the highest bidder.
Alternatively, a Chapter 13 bankruptcy can be filed, and the lease will not be in jeopardy.
IF I AM BEHIND ON MY RENT AND I FILE FOR BANKRUPTCY, WILL I LOSE MY APARTMENT?
The answer to this question depends on several factors. First – If there is a judgment for possession entered in State Court for possession of the apartment and the debtor has the right to cure that monetary default, the debtor may pay one month’s rent to stop the eviction. The debtor may be evicted if there is no way to cure that judgment.
Practically speaking, once a Chapter 7 bankruptcy is filed, most landlords will not evict a tenant until permission is granted from the Bankruptcy Court, which can take quite some time. The landlord’s attorney often requests permission, by filing a motion, regardless of whether permission is needed.
If someone is just behind on rent and files for bankruptcy, he or she should quickly make arrangements with the landlord to get caught up on the rent. The rental arrears are dischargeable in bankruptcy, and the landlord can begin eviction proceedings with permission from the Bankruptcy Court. Alternatively, a Chapter 13 bankruptcy can be filed to repay the rental arrears over three to five years.
If you want to discuss your options with a skilled bankruptcy attorney, please call 212-244-2882 anytime. The Law Office of William Waldner only practices Bankruptcy Law and is always here to help you.
This article is intended for educational purposes only. By reading this article, no attorney-client relationship has been created.