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Questions about Landlord and Bankruptcy

Landlord and bankruptcy questions often arise when a landlord or tenant files bankruptcy. Either the tenant or the landlord is left wondering about the landlord’s rights if any during the bankruptcy process. Uncertainties of laws that apply to landlords in a bankruptcy often lead to questions like the ones answered below.

I am a disabled tenant living in a home that was foreclosed. I have paid rent on time and never received any notice of what was going on with the property. The landlord filed bankruptcy. Will the landlord’s bankruptcy cause me to be evicted?

Under federal law if the house is sold in a foreclosure, the new owners have to honor your lease. If there is no lease they have to send you a 90 days’ notice and can then start the eviction process. In many cases the bank keeps the property, and will not bother with any eviction. Your individual circumstances can determine whether or not you would be evicted. It is best to ask an Expert with the details of your case to be sure of your legal standing.

We are in a Chapter 11 bankruptcy. What are our landlord’s rights about locking us out for not paying rent?

The federal bankruptcy law that outlines the applicability of an automatic stay, which pauses lawsuits and legal proceedings) is 11 U.S.C. section 362

Under subsection (a)(22), a bankruptcy petition operates as a stay of:

"the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor;" 11 U.S.C. section 362(a)(22).

If you choose not to pay your rent, the creditor can ask the bankruptcy court to lift the automatic stay and allow them to proceed with an eviction. If you don’t pay, your landlord can foreclose with clearance from the bankruptcy court.

I filed Chapter 7 bankruptcy and listed my commercial lease (landlord) on it, but I also signed a personal guarantee. Even though I signed the guarantee do I still have to pay the landlord even though I have filed for bankruptcy?

The US Constitution gives the protection of the right to file bankruptcy. That right cannot be waived. The lease debt can be discharged in a bankruptcy court even though you signed an agreement that stated you would pay if you filed bankruptcy.

I am considering filing bankruptcy on my LLC. I have no other debt but lease payments to my landlord. I have personally guaranteed a lease for 4 additional years. I would like to get out of the lease. What recourse do I have and can my landlord go after me personally?

When you file bankruptcy on your LLC, your landlord can still sue you personally. Filing bankruptcy will not solve your 4 year lease guarantee, if you personally (not through the LLC) guaranteed it. If the landlord sues you for the debt and receives judgment, then he can garnish wages, bank accounts, etc., to recover the judgment amount.

The landlord does have an obligation to lessen his damages by re-renting the space as soon as he can. If he is able to rent out the space you would only be responsible for the rent that is payable while the property is vacant.

We rent a private townhome in Florida and our landlord has filed a Chapter 13 bankruptcy. He has since rejected our lease and told us to stop paying him rent. We received the Chapter 13 plan which states the landlord surrendered the leased property. What does this mean for us?

If surrendered, the property will be taken by the bankruptcy trustee and sold, or foreclosed by the bank. If the property has a market value more than the balance on the mortgage then the property will be foreclosed by the bank.

You will get a notice of either the sale or the foreclosure. You should continue to pay the rent to the landlord until the property is transferred to the trustee or a new owner. When the transfer happens you will then pay your rent to either the trustee or the new owner.

Having the right information and understanding landlord and bankruptcy laws can help when dealing with questions regarding landlord bankruptcy. Experts can help answer questions about tenant’s rights when a landlord files bankruptcy or the process a tenant may undergo if a landlord files bankruptcy. Get the answers fast and affordably by asking an Expert to assess your particular situation.
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