If my landlord filed for a Chapter 7 bankruptcy, does that mean he will definitely have his house foreclosed on?
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If my landlord filed for a Chapter 7 bankruptcy, does that mean he will definitely have his house foreclosed on?
I live at the guest house (cottage) of my landlord. He recently filed for a Chapter 7 bankruptcy, and listed me as a creditor. I know this means he is trying to avoid paying my security deposit back at the end of my lease. Now my concern is whether or not the property we live on will be foreclosed. I had to pay my first, last, and security before moving in to this cottage, and if the property goes back I stand to lose both my security and last month’s rent. I am only going into my 5th month here and I would like to know how to handle this situation? Should I keep paying rent?
Asked on February 28, 2011 under Real Estate Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Until and unless the property is foreclosed on, you have to keep paying rent. That's because regardless of the filing, as long as the landlord is still the owner, your lease with him (which is a contract) is still in force.
Whether or not he will lose the property in bankruptcy depends on the circumstances.
* If he doesn't have a mortgage, the property will be an asset that *could* be sold for the benefit of creditors, but whether it will be depends on the real estate market, how hard it would be to sell, what it would bring, etc.
* If he has a mortgage, then he has a choice: he can affirm the mortgage (agree to keep paying, notwithstanding the bankruptcy) in which case he keeps the property as long as he makes payments; or he can choose to let the bank have the property, in which case, at some point, his ownership interest will be servered and the bank will take the property. When that happens, you no longer need to pay him the rent and may be in a position to negoatiate with the bank to continue residing there.
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