Tenants and landlords are no exception to the ever growing number of individuals filing bankruptcy. A bankruptcy can be a very stressful situation. Bankruptcy becomes even more stressful when real estate is involved, especially when it involves your home. Anything that could potentially threaten your shelter, a necessity of life, should be taken seriously. It is important that both tenants and landlords know their rights during a bankruptcy effecting real estate.
What we are seeing today in the real estate industry is an increase in real estate bankruptcies. Families are falling on hard times and are unable to pay rent. Many families are filing for bankruptcy in an effort to stop the eviction process. When a landlord is not receiving rental payments on time, he or she begins to fall behind on the rental property’s mortgage payments. Some landlords cannot pay the rental property’s mortgage payments at all. The landlord will then face foreclosure and/or bankruptcy. In some cases, the landlord may try to reduce the monthly rental amount; however, as much as this method may help a family keep a roof over their heads, it also creates bankruptcy risk for the landlord.
Tenant and Landlord Lease Contracts in Real Estate Bankruptcy
When a tenant or landlord files bankruptcy, two things can happen to the lease contract: 1. The lease is allowed to continue in effect as normal. 2. The lease is cancelled.
If the lease is “assumed” (allowed to continue as normal) and the landlord has filed for bankruptcy, then the tenant promises to keep paying rent and to keep the real estate property clean. When a tenant has filed for bankruptcy, the landlord promises to keep the real estate property safe and habitable, providing adequate water, power, and heat.
If the lease is cancelled by the tenant, the landlord can serve a “Notice to Vacate” to the tenant. This means the tenant must evacuate the real estate property within a certain number of days, usually 30. If the tenant does not leave the premises, the landlord can file for eviction. When this happens, the tenant will be responsible for all rent due per the lease agreement through its original expiration date.
If the lease is cancelled by the landlord, the tenant can file a claim in the landlord’s bankruptcy for damages from early lease termination. The tenant may be able to remain in the real estate property for the remainder of the lease. The tenant can have rental payments reduced due to damages suffered from the landlord’s bankruptcy, such as not providing included heat, electric, or water.
Tenant and Landlord Rights During Eviction in Real Estate Bankruptcy
If the tenant is filing for bankruptcy and the landlord has not served an acquired eviction notice, then the tenant can file for bankruptcy protection. Once a bankruptcy is filed, an automatic stay is in place, meaning creditors cannot seek monies from debtors during the bankruptcy process. This automatic stay will prevent the landlord from evicting the tenant. Remember, if the landlord already obtained an “Order of Eviction” prior to the tenant filing bankruptcy, a tenant’s bankruptcy WILL NOT stop the eviction process.
There are only two ways to stop a tenant eviction. Within 30 days of filing bankruptcy, the tenant must file a certification with the court and to the landlord stating that under the state landlord-tenant laws, the tenant is allowed to fix the problem that caused the eviction. And, the tenant must deposit monies with the court in the rental amount that would be due during the 30 days after the tenant filed for bankruptcy; or pay all back rent due before the bankruptcy was filed.
Contact Our Tenant Landlord Real Estate Bankruptcy Lawyers
Tenant Landlord bankruptcy laws are extremely complicated, especially when it comes to contractual lease agreements. It is imperative that you hire an experienced real estate law and bankruptcy attorney to assist you. If you are a landlord or tenant considering real estate bankruptcy, know your rights. Contact the real estate and bankruptcy attorneys at Wynn at Law, LLC. You can reach our real estate bankruptcy attorneys by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law, LLC has convenient office locations throughout Southeastern Wisconsin, including: Lake Geneva, Delavan, Muskego, and Salem.
*The content and material on this web page is for informational purposes only and does not constitute legal advice.