Owing Rent When Filing Chapter 13

01 May 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 you’ve caught up, instead of saving that money. 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. You can argue from the allowed household expenses from the Means Test, which will vary with your state and household size and which willlikely be higher than what your increased spending will be after you’ve paid off theback rent. You can get the different categories of amounts from the United States Trustee’s website. Good luck !!

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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