Landlord and tenant rights in bankruptcy

As of press time, the CDC had barred residential landlords from evicting most tenants through December 31, 2020.

Other eviction bans may apply in your situation, and it’s possible the federal ban could be extended. However, the rules will inevitably expire, and there are several important things tenants and landlords need to know about their rights.

Over the course of the pandemic, many landlords and tenants have had to address rental shortfalls. Some renters, unable to pay the rent in cases where an eviction ban was not in effect, have filed for bankruptcy in order to stop the eviction process. Meanwhile, landlords who are not receiving rent may not be able to make their mortgage payments and may also face foreclosure or bankruptcy.

When either a tenant or a landlord files for bankruptcy, the lease can either be “assumed,” that is allowed to continue as normal, or it can be cancelled.

When a lease is assumed: If the landlord has filed for bankruptcy and the tenant assumes the lease, the tenant is promising to pay rent and keep the property clean. If the tenant has filed for bankruptcy, then the landlord is obligated to keep the property safe and habitable.

When a lease is cancelled: If the landlord files for bankruptcy and the lease is cancelled by the tenant, the landlord can serve a “notice to vacate.” If the tenant does not leave, the landlord can file for eviction.

If the lease is cancelled by the landlord, the tenant can file a claim in the landlord’s bankruptcy case for damages from early termination. The tenant may be able to remain in the property for the duration of the lease and/or may have rental payments reduced if the landlord is no longer providing essentials such as heat, electricity or water.

If the tenant files for bankruptcy: Once a tenant has filed for bankruptcy, creditors cannot seek money and landlords are prevented from evicting a tenant, unless the landlord had already obtained an order of eviction before the tenant filed. If the tenant files for bankruptcy after an order of eviction, they may be able to stop the order by paying rent owed through 30 days after filing.

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