Bankruptcy can be a source of relief and a fresh start for individuals struggling to keep up with overwhelming amounts of debt. Filers receive legal protection from creditors and debt collectors as they work to build a repayment plan that is sustainable for the future.
It may not be immediately clear how filing for bankruptcy will affect people who are renting their residence from a landlord, however. It is important for renters to understand their payment obligations and the possible effects that bankruptcy will have on their tenancy.
Does bankruptcy relieve a tenant from paying rent?
When an individual files for bankruptcy, an automatic stay goes into effect that temporarily suspends all collection activity against the filer. However, an automatic stay does not affect a landlord’s ability to collect rent from a tenant. The automatic stay does still stand to benefit a tenant by putting a small hold on any eviction proceedings and by preventing the landlord from raising rent or security deposit amounts after the filing.
Will a renter face eviction for filing bankruptcy?
Landlords cannot evict a tenant for filing for bankruptcy if they are up-to-date on their payments. In fact, a landlord cannot cite bankruptcy as the primary cause for eviction even if there is a clause in the lease agreement against filing for bankruptcy. The landlord must have a legally acceptable reason for evicting a tenant, such as if the tenant fails to uphold their payment obligations.
Landlords cannot rightfully evict a renter on the basis of filing for bankruptcy alone. Tenants who face wrongful eviction following a bankruptcy filing have the right to defend their position through legal action.
