Owing Rent When Filing Chapter 13

If you owe rent when filing a Chapter 13 bankruptcy case, it’s not easy to figure out how to pay the back rent.  You’ll be paying this pre-bankruptcy debt at 100% when you’re likely paying your credit cards maybe 5%.  Trustees like to object when one class of creditors is paid better than another.  That’s why you usually cannot maintain regular student loan payments when you’re not paying your credit cards in full.

Landlords have rights that credit cards don’t:  They can evict you.  This supports separate classification of the landlord and a 100% payback of the pre-bankruptcy unpaid rent.

You can even have a written agreement before the bankruptcy filing to pay the full unpaid rent over only a few months, instead of the full duration of your Chapter 13 plan.  Then your plan can “assume this executory contract” so you can pay 100% of the old rent at an accelerated rate.

All this is quite similar to the “critical vendor” theory in business bankruptcies, where a court might allow a debtor business to immediately pay a critical supplier’s pre-bankruptcy debt to get new supplies for new sales, even though there is very little in the Bankruptcy Code to support this.  In the consumer context, a landlord is certainly a critical vendor.

The trustee may demand that you then pay her the old rent payments after they are completed.  You’ll have to argue that an estimated increase in living expenses at that future time – increased car repairs as your car gets older, for example, or the ever-increasing voracious appetite of your children as they grow up – means that you’ll still need that money even after the old rent is paid off.  Good luck !!