Good news for tenants! You can wipe out most debt related to your tenancy in bankruptcy!
April 7, 2012 Leave a comment
Tenants often get saddled with debts they cannot pay after renting a house, condo, or apartment. There are debts for back rent, unpaid utilities, damages to the premises, or unpaid security deposits. All of these types of debts are dischargeable in a bankruptcy usually with no problem. A landlord would have to prove fraud or willful and malicious damage to his premises to get these debts to be not dischargeable in bankruptcy.
In some cases there can even be a huge debt left over if you vacate the premises early in a lease. If you sign a lease for a year and vacate after six months the landlord can sue you for the other six months of the lease. This can be substantial. Many of my clients have signed a 10 year lease for a commercial space and then quickly vacated when their businesses failed. The landlords then sued and got judgements in excess of $300,000. These clients quickly filed for bankruptcy and discharged this debt without any trouble and we didn’t ever see the landlords show up at the 341 hearing.
Landlords often threaten you with paying for these debts but just mention the word bankruptcy. There is nothing they can do once you file bankruptcy if there is no fraud or willful and malicious damage. So don’t worry when they threaten you with lawsuits. One of my commercial clients was called to a debtor’s exam about his huge debt for his broken lease. He showed up with his bankruptcy papers in hand. The lawyer stuttered and stammered and when she went to the judge he laughed and said she would have to seek redress in bankruptcy court. We got his discharge and never heard from them again.
Landlords are supposed to make every attempt to re-rent the premises you vacate when you break your lease. We usually don’t know if they even bother to do this though. It’s called mitigation of damages. If the landlord tries but can’t re-rent your vacated premises then you are still liable for the unpaid rent if you don’t file bankruptcy.
Even a debt of $300,000 goes away easily in bankruptcy so don’t worry. If you are a residential tenant who has a much smaller debt from a few months of back rent then that can be put in the bankruptcy too along with your credit card debts, medical debts, and any other dischargeable debts you may have.
Don’t let a landlord bully of threaten you with a big bill because bankruptcy will wipe it out. Don’t let them threaten you with a lawsuit either. A bankruptcy will also stop an eviction and force the landlord to seek a motion for relief from stay before he can remove you from the premises. If you need more time to vacate the premises then bankruptcy give you extra time to move.
I believe that bankruptcy’s main value is in wiping out those old debts so call a bankruptcy attorney today if you have debts related to a tenancy.
I am a San Diego bankruptcy attorney. For further information please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com. Or call my office for a free consultation at (619) 702-5015. Call now for free credit report and analysis!
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