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Landlord and bankruptcy related questions can arise when a landlord or tenant files bankruptcy leaving both of them wondering about their rights during the bankruptcy procedure. The law governing such issues might be confusing for most of us. The U.S. Bankruptcy Code Section 362 automatic stay precludes landlords from terminating lease in default or evicting tenants after they file bankruptcy. Landlords are entitled to seek relief from automatic stay, but bankruptcy courts typically don't grant immediate relief unless a default jeopardizes a property or a tenant fails to fulfill its post-petition lease obligations. Lease contracts that are in default are considered as executor contracts as the performance is still due from both the landlord and the tenant. Debtors are authorized to occupy and sublet the leased premises to a third party within 60 days, which may get an extension by the court order. A debtor must pay all pre and post-petition defaults if he / she chooses to assume the lease. However, the lease is deemed as rejected if the tenant chooses not to assign / assume the lease. According to Bankruptcy Code Section 365 (d), the debtor has to perform all commercial obligations until a lease is either assumed or terminated. The section also requires the tenant to pay rent due on the first lease payment date following the bankruptcy petition filing. The landlord can petition the court seeking payment if the tenant fails to do so. The section makes it compulsory for the bankrupt tenant to perform all other post-petition lease obligations such as paying towards common area maintenance, tax and insurance charges. If a tenant fails to pay rent on time and files bankruptcy by the next payment date, the tenant has to pay only the next rent and its associated charges. Bankrupt tenants also have to pay administrative rent if they continue to occupy premises after a lease is expired or terminated in bankruptcy. This article answers some of the frequently asked questions on bankruptcy laws related to landlords and tenants. What are the rules while filing bankruptcy under chapter 11? Can a landlord evict a tenant for not paying the rent?
Embodied in the Code at 11 U.S.C. Section 362, the Automatic Stay is essentially an injunction against claimants and creditors of a bankrupt debtor which prohibits most actions against the debtor or property of the estate of the debtor. The automatic stay comes into effect upon filing of a bankruptcy petition with the court. Under sub-section (a)(22), a bankruptcy petition operates as a stay on "the continuation of any eviction, unlawful detainer action, or similar proceeding by a landlord 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 l landlord has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor.” If a tenant chooses not to pay the rent, the landlord can ask the bankruptcy court to lift the automatic stay and allow him / her to proceed with an eviction. If the tenant doesn’t pay, the landlord can foreclose with clearance from the bankruptcy court. I am considering filing bankruptcy on my LLC as I want to avoid the pending lease payment for four years to my landlord. What recourse do I have and can my landlord go after me personally?
Filing bankruptcy on LLC won’t help you to avoid the payments which need to be paid for the four year lease guarantee as you have personally guaranteed it. Thus, your landlord can still sue you even of you file bankruptcy on your LLC. If the landlord receives judgment in his favor, he can garnish wages and bank accounts to recover the amount. The landlord has an obligation to minimize his damages by re-renting the premises. If he does that, you would have to pay the rent which is payable while the property is unoccupied / vacant. We stay on rent in Florida and our landlord has asked us to stop paying him rent as he has filed bankruptcy under chapter 13 and has surrendered the leased property. What should we do now?
When surrendered, the property will be taken by the bankruptcy trustee and will be sold. Or it can be foreclosed by the bank if the market value is more than the balance on the mortgage. In both the case, you should receive a notice and you should continue to pay the rent to the landlord until the property gets transferred to the trustee or to a new owner. Once either of the process is done, you will have to pay the rent either to the trustee or to the new owner. I am a disabled person and living in a house which was sold in a foreclosure and I have paid rent on time. Now, as the landlord has filed bankruptcy, will it lead to my eviction from this place?
It is not likely to happen as under the Federal Law, the new owner of the house / property is supposed to honor the lease. If you have been staying there without a lease, the owner should send you a 90 days notice before going ahead with the eviction process. In many case, the bank has the ownership of a foreclosed property. Having the right information and understanding the law can help you while dealing questions pertaining to landlord and bankruptcy. You should ask a bankruptcy lawyer to help you on such issues.
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landlord and bankruptcy, Landlords bankruptcy, Landlords rights in a bankruptcy, Landlord and tenants bankruptcy,
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