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  1. #1
    Join Date
    Aug 2012
    Posts
    1

    Default Landlord Filed for Bankruptcy - What Happens to My Lease and Deposit

    My question involves bankruptcy in the state of: MO
    I am not sure if I shall ask my question in this forum or in the landlord-tenant forum:
    I was notified last week thatmy landlord has filed for bankruptcy under chapter 13. My security deposit is 1500 $. These are my questions:
    - is the lease contract terminated now? Honestly, I prefer to leave ASAP since I have a baby at home and my work schedule does not let me to move at any time (probably next month is the best time for us). Besides, the lanlord stopped taking care of the condo's maintenance and I am afraid that I willbe screwed if something bad happens. And how shall i find out? Ask the trustee or the court?
    - do you think that I have any chance to get my deposit when I leave?
    - can I withhold the last month rent for the deposit?
    - what if I transfer the rent (or at least the last month rent) to a saving account instead of paying the landlord as a form of security that I will get my deposit and also show that I have no intention not to pay my rent.
    Please Help me because this has caused a lot of stress for us and leaving with a new born is extremely difficult.
    Thank you very much

  2. #2
    Join Date
    Sep 2005
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    Behind a Desk
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    74,906

    Default Re: Landlord Filed for Bankruptcy - What Happens to My Lease and Deposit

    If we're talking about a personal bankruptcy, there's a possibility that your 'landlord' is a separate entity - many landlords will create a corporation to hold the real estate, with the tenant renting from the corporation - in which case the bankruptcy likely has no relevance to your continuing tenancy.

    A Chapter 13 bankruptcy is a restructuring of debt, so I would not expect it to have any impact on your bankruptcy. If it becomes a Chapter 7 bankruptcy, or if your 'landlord' is technically a corporation, LLC or similar entity and ends up in Chapter 11, it would be possible for the landlord (really the trustee) to accept or reject the lease. If the lease is accepted, everything continues as normal. If it's rejected, the lease is canceled and you can be given notice, but you would have the right to petition the bankruptcy court to allow compensation. You might also try to stay in residence for the balance of the lease term, possibly at a lower rate of rent, if for example the reason the landlord wanted to avoid the lease was not to get you out but was instead to avoid paying certain expenses that were included in the lease but were shifted to you after its rejection (e.g., utilities, cable, lawn care).

    Your security deposit should be protected in bankruptcy.

    A security deposit is not your last month's rent.

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