If you are considering filing for bankruptcy and you rent an apartment, you'll need to be careful. Filing for bankruptcy could affect your lease agreement. Here's what you need to know.
Does your lease contain a bankruptcy clause?
Read over your lease agreement. There may be a clause in it that says your lease agreement will be terminated if you file bankruptcy. This is called an ipso facto clause. However, this clause is generally unenforceable based on bankruptcy laws. While this sounds like good news, you'll need to be prepared to deal with your landlord if they claim you breached the lease should you file bankruptcy. Be sure to take your lease agreement with you when you speak with a bankruptcy lawyer.
Can you continue to make rental payments?
A lease agreement is an executory contract, which means you will still be required to pay rent and abide by the terms of the lease. However, bankruptcy law allows you to assume or reject a lease when you file bankruptcy. Carefully look at your budget and determine whether or not you can afford to remain in the rental unit. It's important to know that during the bankruptcy process, you will be appointed a trustee. One of their obligations is to determine whether or not you can afford to stay in the rental property. The trustee may determine that the lease will be rejected, which would mean you would need to find somewhere else to live.
How much money would you have after filing?
Although a trustee is who will determine how your financial means are divided and how much you will have to budget for living expenses, a bankruptcy lawyer can give you a general idea of the amount of money you would have to live off of after filing bankruptcy. If you will continue to struggle to pay basic living expenses and keep food on the table after filing, you should consider relocating to a more affordable apartment before you file bankruptcy.
What are the eviction procedures in your location?
If you don't relocate and your trustee does reject your current lease, your landlord will be able to follow through with eviction proceedings. Because of this possibility, it is crucial for you to know what the eviction laws are in your location. Depending on local laws, evictions can be completed anywhere from several weeks to several months, which could add undue stress in an already stressful situation. Click here for more info.