The Effect of Bankruptcy on Your Rental Lease

 Posted on December 31, 2024 in Bankruptcy

Bankruptcy can be a great tool to get back on track if you have a great deal of debt, but it is also a significant decision that can affect many areas of your financial life. If you rent your home or apartment, you should know how bankruptcy can affect your rental lease. A qualified Galveston, TX attorney can advise you on the effect bankruptcy may have on your rental. 

Effect of Bankruptcy on Rental Agreements 

If you are current on your rent, bankruptcy will not affect your rental. A landlord cannot evict you merely because you have filed for bankruptcy. If you are behind on rent, you may wonder if and how bankruptcy can affect your obligations as a tenant. This is a complex area of the law and the effect of bankruptcy will depend on the facts of your case, but there are some important points to keep in mind:

Unpaid Back Rent is Debt

Any unpaid back rent that you owe your landlord is considered a debt, and it may be dealt with in bankruptcy. On the other hand, when it comes to ongoing monthly rent, you are still responsible for paying that regardless of what happens in bankruptcy, as long as you remain in the rental. 

Automatic Stay and Rentals in Bankruptcy 

After you file for bankruptcy, the court will issue an automatic stay halting creditor actions. That includes efforts to collect unpaid rent such as eviction proceedings, so long as the court has not yet issued a judgment. There are exceptions to the automatic stay and rentals. For example, it will not apply to your rental if you are found to be engaging in illegal activities. Further, the automatic stay may be temporary because lenders can file a petition with the court to lift the automatic stay. Still, the automatic stay may be a tool to temporarily give you some relief on unpaid rent while bankruptcy proceeds.

Assuming or Rejecting the Lease

In bankruptcy, you may either assume or reject the lease subject to the bankruptcy court’s approval, usually within 60 days from the date of your bankruptcy filing. If you assume the lease, it means you decide to keep the rental and continue fulfilling your obligations under the lease. If you reject the lease, you will be released from further obligations. In that case, any unpaid rent will become part of your bankruptcy case. 

Contact a Waller County, TX Bankruptcy Attorney

If you are currently renting a home and getting ready to file bankruptcy, and are concerned about how bankruptcy may affect your rental lease, Liberty County, TX bankruptcy attorney Vicky Fealy is here to assess your situation and advise you on your most appropriate legal options. Contact The Fealy Law Firm, PC at 713-526-5220 for a complimentary consultation today.