If our landlord files a Chapter 7 bankruptcy,what are our legal rights as a business tenant?

UPDATED: Aug 28, 2011

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If our landlord files a Chapter 7 bankruptcy,what are our legal rights as a business tenant?

What happens to the first and last month rent? The electric company issued a shut off notice for the end of this month, which the landlord is respnsible for. Do we pay the electric bill and any other bills and deduct it from our rent? Do we pay the rent at all? Will we have to move?  Can they just close the office? We are a small non-profit business.

Asked on August 28, 2011 Pennsylvania


MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Unfortunately, you can be considered herein as both a creditor and a debtor to the bankruptcy claimant, depending on how the monies flowed and what is owed. If you paid a security deposit, which is usually the amount of first and last month's rent, then you have to decide what your next step is. Usually evictions do not occur overnight on rentals and the bankruptcy process is a long one. Make sure you file a claim to preserve your rights with the bankruptcy court. The forms can be found online and you can submit pretty quickly. Once you submit, look through your books and records and see if you owe any money as of today's date. The electric company is considered a creditor and you may wish to contact the electric company and see if your portion of the bill (if this building has many tenants) can be placed in your name or if you can pay it for this month and then decide what your next step can be. Withholding further payments from your landlord will undoubtedly be a blessing and a curse. If you withhold monies, you could be considered in breach of the contract but it would be up to you to show that your landlord breached first by no longer providing electricity, perhaps running water and so forth. Then, if the trustee attempts to collect back rent from you, you can show that you have a counter claim for monies to move mid-tenancy, that you are owed your security back and that it all should even out.

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