Featured News 2012 When a Landlord Files for Bankruptcy

When a Landlord Files for Bankruptcy

If you are a tenant and your landlord files for bankruptcy, the decision may directly affect your living situation. Thankfully, there are specific federal laws in place which will protect your from being evicted when a landlord files for protection. While there is no risk of an eviction, you may be notified that you need to leave the home within a matter of months or years. You will have time to search for a new home and pack up your stuff while your landlord works through the details on his or her side of the case.

If your landlord says that he or she is trying to keep the home despite bankruptcy by using a Chapter 13 repayment plan, then your lease may not be altered. You may be able to remain in your home without any fear of being told to leave. However if your landlord says that they have filed a Chapter 7, which is a bankruptcy that liquidates all assets, then the chances are that he or she will want you to move out. The landlord may be current on the mortgage payments on your property, but be late on other debts that have developed the need for a bankruptcy.

If your landlord is not current on your mortgage for the home or condo in which you live, then the bank may be threatening to foreclose. A bankruptcy will be able to put an automatic stay on the mortgage, meaning that the bank cannot enforce foreclosure on the home. This will give you more time in the house and help your landlord to determine how to handle the debts. The Protecting Tenants at Foreclosure Act of 2009 was passed by the Obama Administration three years in order to handle what happens when a landlord files for bankruptcy and that bankruptcy affects a tenant. According to the new law, tenants are safe to live in the home at least until the end of their lease. Month-to-month tenants are permitted to have 90 days from the date of the sale if a home forecloses.

There are two exceptions to the protections rules. First of all, if the new owner of the property intends to move into the house, this allows a tenant with an outstanding lease or month to month agreement only 90 days to stay in the property. If you rent in a city that does not have rent control and does not have “just cause” eviction protection, then you may still be susceptible to an eviction. In most cases, the lender or broker will contact you personally as the tenant and tell you that you need to move out by a certain date.

You may be offered a cash incentive to move out even sooner. This is known as cash for keys, and is a method used by many mortgage brokers in order to get new tenants into the house sooner. In some cases, a new landlord may purchase the house and consent to letting you rent from him or her. If this happens, then chances are that you will not have to leave.

It is often smart to hold out in the home until you determine who the new owner is to see if this arrangement can be made. Contact a real estate attorney today if you need more information about a landlord’s bankruptcy and how it affects your rights as a tenant. If you believe that you are being treated contrary to the statutes and protections that are yours by the rights listed in the Protecting Tenants at Foreclosure Act of 2009, then contact a real estate attorney today to start exploring your litigation options!

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