If an individual or business seeks debt relief in the form of bankruptcy, creditors, employees, tenants, and others around them are affected. If a landlord files for bankruptcy, for example, their tenants will be involved in the filing process to a certain extent. If you are a landlord struggling with debt, Behm Law Group, Ltd. offers counsel in filing for bankruptcy. On the other side of that coin, Behm Law Group, Ltd. also offers advice for tenants with a bankrupt landlord, providing important information regarding their role according to the bankruptcy code in Worthington, MN.
Landlords filing for bankruptcy will either file Chapter 7, Chapter 11, or Chapter 13 bankruptcy. For those that qualify for the asset liquidation process in return for debt discharge, Chapter 7 is the most common option. Both Chapter 11 and Chapter 13 offer a debt reorganization bankruptcy structure. Chapter 11 is designed to reorganize the debts of landlords that are not sole-proprietorships or partnerships (e.g. apartment complexes with multiple locations owned by a corporation). Chapter 13 bankruptcy, on the other hand, provides debt reorganization to many landlords who have a sole proprietorship or a partnership operation.
What to Expect as a Tenant
If your landlord files for bankruptcy, they have to inform all their tenants. When any bankruptcy case is opened, the court puts an automatic stay on collections from creditors, but it doesn’t mean you can stop paying rent. However, it does mean that if the property your landlord rents out is in foreclosure, that process is halted and your landlord retains ownership of the property. Because of this, you should continue to pay your landlord until you are notified by the bankruptcy trustee or the mortgage creditor itself that ownership of the property has changed. This change can occur in several ways:
- Your landlord’s mortgage lender can file a motion with the bankruptcy court to lift the automatic stay for that debt. If the motion is successful, the trustee or the mortgage lender itself will let you know who to pay rent to.
- If the case ends and your landlord’s property is liquidated, the ownership may change to the party that has purchased the property. If this occurs, the trustee will provide the information you need about your new landlord.
- If no one purchases the property, you will make payments to the trustee in the meantime.
If your landlord retains the property in their case, you will continue to make payments to them. If they do not retain it and another buyer plans to use the property for other purposes, you may be forced to move. You will be given fair warning and 90 days, or some other mutually agreeable time period, to find a new living situation.
The bankruptcy code can be difficult to navigate for all involved. In most cases, a bankrupt landlord will not affect tenants drastically, but it’s important to be aware of their financial status and the bankruptcy code in Worthington, MN. To learn more about filing for bankruptcy as a landlord, contact Behm Law Group, Ltd. at (507) 387-7200 today.