Unfortunately, when debt becomes too much to handle, it’s important to understand your legal options. In general, most people in an overwhelming amount of debt will exhaust all possible avenues before making the decision to file for bankruptcy. While this process can be incredibly beneficial in helping you eliminate debt, it can also impact different areas of your life. As such, one concern many have when deciding whether or not to file is the impact this process can have on their lease agreement. If this represents your hesitations with the process, this blog explores what you should know about this process and the importance of working with a Memphis, TN consumer bankruptcy lawyer to help you navigate these complex issues.
What Happens When I File for Bankruptcy?
What happens when you declare bankruptcy will depend heavily on the chapter you’ve filed. As a consumer looking to file, you are generally required to pursue a Chapter 7 or Chapter 13 filing.
Chapter 7 bankruptcy involves the liquidation of non-exempt assets to pay back your creditors. Generally, the trustee assigned to your case will seize and sell all eligible assets and give the proceeds to your creditors based on their priority order. While many worry about losing their assets during this process, this is a shorter form of bankruptcy, typically only taking 6 months before your case is closed.
On the other hand, you may choose to pursue Chapter 13. This is a reorganization process in which your debts will be combined into one lump sum that you will make monthly repayments on. These payments will last three to five years, depending on the circumstances of your case. Additionally, each payment will be made to your trustee, who will then distribute the funds to creditors based on their priority.
Will This Impact My Apartment Lease Agreement?
First and foremost, it’s important to understand that when you declare bankruptcy, regardless of what chapter you pursue, you are granted an automatic stay from collection efforts against you. This includes wage garnishments, lawsuits, and foreclosures. Essentially, all creditors are required to stop all efforts against you in relation to the debts you owe.
As such, if your landlord has threatened eviction actions against you as a result of unpaid rent, they will be unable to evict you due to the automatic stay. Additionally, bankruptcy gives you the option to assume or reject the lease. If you assume it, it means that you are agreeing to the full terms and conditions of the lease, including rent payments. Should you reject the lease, you will still be responsible for the outstanding payments.
Finally, bankruptcy can impact whether or not your landlord decides to renew your lease. Some landlords, especially property management companies, may be hesitant to renew the lease of a tenant who has filed for bankruptcy, as it shows an inability to make payments.
As you can see, bankruptcy can be an incredibly impactful decision. That is why it’s in your best interest to discuss your legal options with an experienced attorney. At the Arnold Law Firm, we understand how overwhelming these matters can be to navigate, which is why we are committed to helping you fight for the best possible outcome for your circumstances. When you need assistance, do not hesitate to contact our team today.
