If you’re thinking about filing for bankruptcy, you might not be sure of which debts are dischargeable in bankruptcy and which are not. One type of bankruptcy that most people think is not dischargeable in bankruptcy is back rent. However, this rent can actually be discharged as unsecured debt. If you are behind on your rent payments, use the information in this article to learn exactly what happens to this type of debt in bankruptcy.
Renting an apartment or a home is sometimes the smartest economic decision, especially in today’s market. However, if you find that you have had to default on your lease agreement due to financial difficulties, bankruptcy can help your situation. Back rent is treated like unsecured debt in bankruptcy. Just like medical bills, credit card debt, and personal loans, you can include your back rent in your bankruptcy. In a few rare situations, back rent is treated differently, but in most cases you will be able to discharge your back rent in bankruptcy. Not only can you discharge this debt in most cases, but you are actually obligated to state that you owe money to your landlord when you file for bankruptcy. This is because you have to make a list of all of your creditors – landlord included.
If you are facing eviction, bankruptcy might be the right choice for you because it will delay the eviction. An automatic stay will begin once you file for bankruptcy. The automatic stay stops all creditors, including your landlord, from trying to collect a debt that is owed to him or her. The only way that you will still have to pay your rent or back rent is if your landlord files a motion for automatic stay relief. Without automatic stay relief, you will have up to four months to remain in your apartment or home without threat of being evicted.
In addition, bankruptcy can allow you to break your lease by rejecting it. Once you reject an executory contract or a lease, you won’t be obligated to make rental payments outlined in the rental agreement. However, before deciding to break your lease under bankruptcy law, realize that doing this will give your landlord the right to speed up the eviction proceedings. This decision can also affect your ability to get a good lease in a new apartment or house. Before you decide to break your lease, you should consult with a bankruptcy lawyer who can help you weigh the pros and cons of your situation.
Before deciding to file for bankruptcy or break your lease, you should consider factors such as your relationship with your landlord, your emotional attachment to the place that you live, and the reality of your debt situation. Is bankruptcy the right decision for you, or are you jumping to conclusions? Consider these questions before you make any drastic decisions. If you need help determining the best option for your situation, please feel free to contact me. I am available to discuss your debt situation and help you make the right decision regarding filing for bankruptcy and breaking your lease agreement. For more information, schedule your free consultation with me today!