Are you late on your rent —
Want to file Chapter 7 Bankruptcy …
Know the risks and your options.
So, what is going to happen if you file a Chapter 7 Bankruptcy while you are late on rental payments? It depends! You may be able to stay in your apartment, but there may be risks so you need to know your options.
Late Rent:
Typically, if you are late paying your rent then your landlord can take you to court and have you evicted. On top of that — your landlord may get a judgment against you for past due rent, late fees, court costs, and any other penalty imposed for breaking your lease agreement.
Bankruptcy Help Judgment:
Bankruptcy may help. Any judgment against you, rent owed or other penalties and fees that you may otherwise incur will be discharged in your Chapter 7 Bankruptcy filing. You are free to move — and should.
Bankruptcy Help No Judgment:
If you do not yet have a judgment against you and are hoping to stay in your current apartment — Bankruptcy may buy you some time. The automatic stay can prevent the landlord from proceeding with any type of lawsuit during the course of your bankruptcy case. However, you may have to pay a deposit over to the Court and the landlord can file a motion for relief from the automatic stay.
Assuming that the automatic stay is not lifted then you will have some breathing room to consider your options and perhaps get an idea where your landlord stands regarding this issue. You may still have to move out.
Pre-Petition debt vs Post-petition Debt:
Although the bankruptcy can discharge debts you have incurred prior to the filing, you may still be liable for additional rent owed if you continue to live in the apartment for the months following the bankruptcy case filing. You must have a plan going into your Chapter 7 case.
Post-Bankruptcy:
After your bankruptcy case is closed, it will be up to the landlord to decide if they want to continue to work with you or not. It does not really matter if you had a month to month or a 12 month lease — once a bankruptcy is filed, the lease is essentially dead. This is why it would be a good idea to know what your landlord is thinking now — your money may be better spent finding a new place!