People file bankruptcy when they can no longer continue keeping up with paying their debts. When faced with the decision of staying current on your rent or making payments upon your debts, it is always advisable to choose to make your rent payment rather than paying on the debts. Nobody wants to be evicted and most of your debts will be likely be wiped out by your bankruptcy discharge anyways (except for most types of tax debt, domestic support obligations, and student loan debt, etc.)
Many people wonder if they can continue living at the place they rent after filing for bankruptcy. If a person is not behind on their rent payments when they file for bankruptcy, they can continue living there so long as they remain current on their rent and remain compliant with the other provisions of their lease agreement. If a person is behind on their payments, they still may be able to continue living there in some circumstances. However, if the landlord files an eviction action in court and gets an eviction order entered against the tenant before the tenant is able to file their bankruptcy case, it will likely be too late for the tenant to avoid being evicted.
On the other hand, if the landlord has not yet obtained the eviction judgment before the bankruptcy case is filed, the automatic stay will stop any eviction proceedings until the bankruptcy case is completed. In this case, if the debtor is able to get caught up on rent payments before their bankruptcy case is done, they should be able to continue living in their rental place so long as they remain complaint with other lease provisions However, if the tenant is way behind on rental payments this may not be feasible, and they may be at risk for eviction after their bankruptcy case is over. In cases where there is past due rent, the landlord may also file a motion asking the bankruptcy court to “lift the automatic stay,” which, if granted by the court, would allow the landlord to proceed with the eviction before the bankruptcy case is over. If the tenant cannot demonstrate an ability to get caught up on their rental payments, the court will likely grant the motion. In cases where the landlord files a motion to lift the automatic stay, or where the debtor doesn’t think they will be able to get caught up on past-due rent during their bankruptcy case, the debtor may be able to negotiate a deal with the landlord to continue living in their rental abode. This is something to discuss with your bankruptcy attorney who may be able to assist with those negotiations. Regardless of whether or not the debtor intends to continue their lease, it is important to note that a debtor’s bankruptcy discharge only wipes out their legal obligation to pay past-due rent prior to the date of filing. Rent due after the tenant’s bankruptcy case is filed, remains the tenant’s legal obligation as long as they continue living there. It is also notable that the automatic stay preventing the landlord from evicting the tenant only applies to evictions for unpaid rent. If the tenant is being evicted for other reasons, such as possessing illegal controlled substances on the premises or endangering the rental property, the automatic stay will not prevent the landlord from proceeding with the eviction.
It is obvious that having an eviction on one’s record negatively impacts one’s ability to be accepted for future rental applications. But, what is the impact of having a bankruptcy on your record? It is always up to each individual landlord to determine whether they will accept your rental application. However, denial of a rental application simply due to a bankruptcy is not that common. A recent bankruptcy actually has some advantages for prospective renters. For one, the former debtor seeking to rent has just eliminated a lot of debt, which leaves them with more disposable income to afford their rent payments. Also, a tenant who just went through bankruptcy cannot file another bankruptcy for a number of years after finishing their last bankruptcy case (i.e. a person must wait 8 years from the date they filed their chapter 7 case to file another chapter 7 case). This should make a landlord less concerned about the potential tenant defaulting on their rent payments, and then, getting those past-due amounts discharged in a subsequent bankruptcy. A prospective tenant can also increase their chances of having their rental application accepted by making a larger upfront security/rental deposit, agreeing to a bit higher amount of monthly rent, or having a co-signer, with better credit, on their lease. There are a lot of factors that a landlord takes into consideration when deciding whether to approve a rental application, including your monthly income and your previous ability to make rental payments. The fact that the prospective tenant recently filed bankruptcy is only one of those factors.
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The impact of a bankruptcy upon a person’s current or future ability to rent is one of many issues that must be considered when a person is thinking about filing for bankruptcy. To determine whether filing bankruptcy is best for you, and to better understand how a bankruptcy will affect your financial future, you should discuss your situation with an experienced bankruptcy attorney. See us at LifeBackLaw.com!
