If you rent an apartment in New York and intend to file for bankruptcy, you may wonder how the decision will affect your lease. The answer is: it depends. If you have a standard lease and have been paying your rent on time as of the date you file, there will be no negative repercussions. However, if your rent is in arrears or your apartment is rent-stabilized, then you need to proceed carefully.

Rental arrears

If you are behind on your rent at the time that you file, then whether or not you lose your apartment depends on certain factors. If a judgment for possession has been entered in New York State Court, then you may have the right to stop the eviction by paying one month’s rent. If there is no option to cure the judgment, then you may be evicted.

Once you decide to file, you should ideally make arrangements with your landlord to get caught up. This is especially important if you’re opting for Chapter 7 because these arrears can be discharged and the landlord can get permission from the Bankruptcy Court evict you. With a Chapter 13, you may have the option to repay the arrears over a three to five year period.

Rent-stabilized apartments

Certain New York apartments are rent-stabilized, meaning that they can be leased for a fraction of the market rate as long as the tenant meets certain conditions.

At one time, if you filed for Chapter 7 bankruptcy, then you could have lost the apartment. Your Chapter 7 trustee is tasked with selling non-exempt assets to pay your creditors. In the case of a rent-stabilized lease, then the trustee would ask your landlord if he or she would pay for you to leave the apartment. If the landlord agreed, then you would be evicted. You couldn’t protect this type of lease with an exemption, so you had to leave unless you could buy the lease back from the trustee. Alternatively, if you filed Chapter 13, a rent-stabilized lease would not be affected, and you would be permitted to remain.

In November 2012, the New York State Court of Appeals ruled that rent-stabilization rights were an exempt asset as a type of public assistance, and therefore something that a bankruptcy trustee could not sell. In March 2015, the U.S. Court of Appeals for the Second Circuit agreed, making it official that New York tenants who declared bankruptcy would not lose their rent-controlled apartments.

If you live in New York and are contemplating bankruptcy, an expert New York bankruptcy attorney will be able to advise you on how your living situation in a rented apartment will be affected. It may be possible that obtaining the fresh start you need will not require you to move. If you are behind in paying your bills or your rent and are seeking a fresh start, then contact the law office of Jayson Lutzky. Mr. Lutzky offers personal bankruptcy representation service and offers free in-person consultations. Call his office at 718-514-6619 to set up an appointment and visit www.MyNewYorkCityLawyer.com for additional information on New York bankruptcies.