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The Effect of Bankruptcy on a Rental Lease

House getting evicted

If you’re considering filing for bankruptcy, you may be concerned about the effect of a filing under Chapter 7 on your living situation. If you’re currently a renter in an apartment or house, bankruptcy could have an impact on whether or not you remain in your home after the bankruptcy is over, and it may provide you with relief from debts related to your living situation that you can’t afford to pay. Read on to learn more about how bankruptcy can affect your rental home lease.

Getting out of your lease during bankruptcy

You may have signed a lease for an apartment at a time when you thought you’d be able to keep up with the rent, either before an expensive medical emergency occurred that posed a drain on your finances, or when you were working at a more lucrative job. Now, you may be struggling or failing to keep up with your rent, but concerned about the possible penalties associated with leaving your apartment before the lease has expired.

Filing for bankruptcy could be a solution for you. During the bankruptcy process, you can alert the trustee assigned to your case that you wish to reject your apartment lease. While rejecting a lease will require you to move, it will provide you with the chance to get out of an unaffordable lease and have any unpaid rent forgiven before you’re subjected to an eviction.

When filing for bankruptcy under Chapter 7, the trustee can technically make the decision on your behalf regarding whether you assume or reject a lease. However, trustees will rarely force you to remain on a lease you wish to reject. Likewise, trustees aren’t likely to force you out of your home if you can assure the trustee that you can afford to make up any back rent you owe and keep up with future rent payments.

Eviction during bankruptcy

If you’re already behind on rent, filing for bankruptcy isn’t a great way to prevent an immediate eviction. That said, a bankruptcy petition’s effect on an eviction is different depending on when you file your petition and what steps the landlord has already taken to have you removed. If you’ve fallen behind on your rent but your landlord has not yet filed an action in court to have you evicted, the automatic stay provided by filing for bankruptcy could give you more time to determine what you want to do. As we’ve discussed in a prior post, the automatic stay provides a window of time during which your creditors cannot file new legal actions against you, continue any ongoing legal actions, or collect judgments they have already obtained.

While the automatic stay will offer you more time to make a decision on your future plans, you will still need to be prepared to pay any back rent and make rent payments going forward if you remain in your apartment. The stay can also be helpful simply as a means of getting more time to look for an alternative living arrangement if you know you can’t afford your apartment.

If your landlord has already filed for and obtained what’s known as a “judgment for possession,” and you only filed for bankruptcy after that judgment was obtained, remaining in your home may be more difficult. You may be able to remain in your home for an additional 30 days if you can provide one month’s rent and prove to the court that you’ll be able to make rent payments going forward. Otherwise, it is likely that you’ll have to vacate the unit. A bankruptcy lawyer can help you determine whether you may be a candidate for redemption of your lease after your landlord has obtained a judgment for possession.

If you are facing a large amount of medical or consumer debt in Maryland and need the help of a professional to move forward, contact the skilled and effective Germantown consumer law and bankruptcy attorneys at Haeger Law for a consultation, at 888-463-3520.