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bankruptcy, chapter 7, Renting

Can Rental Debt Be Discharged in NJ Bankruptcy?

On Behalf of Veitengruber Law | Sep 30,2021

NJ renters spend an average of 19.26% of their monthly income on rent. With a major uptick in unemployment and income loss over the last year and a half, many Jersey renters have been unable to keep up with rent payments. While the eviction moratorium has been extended for some in NJ, others will find themselves facing eviction over the next few weeks due to lack of rent payment. If you are considering bankruptcy to help alleviate the pressure of unmanageable debts, you may be wondering if rental debt is dischargeable under bankruptcy. Rental debt can be discharged during bankruptcy, but it will be handled differently depending on how you file.

Will bankruptcy stop my eviction?

Filing for bankruptcy can delay legal proceedings for eviction, but not for long. The court will issue an automatic stay when you file. This will prevent all lenders and creditors—including your landlord—from taking legal action to collect debts from you until your bankruptcy case is resolved. Your landlord can also file a motion for automatic stay relief, which if granted would allow them to continue with the eviction. You can also be evicted if there is a judgement of possession or writ of eviction ordered prior to the date of your bankruptcy filing. Other than that, you will have the duration of your bankruptcy case to avoid eviction.

Rental Debt Under Chapter 7

Under Chapter 7 bankruptcy, many or all of your debts will be discharged, including your rental debt. There are two options under Chapter 7 to deal with overdue rent. Your bankruptcy trustee or yourself will be able to either assume the lease or reject the lease. If you assume the lease, you will have 30 days after the date you filed for bankruptcy to deposit the overdue rent with the court. Once you pay the overdue rent in full, you can formally assume the lease and remain in the rental with regular monthly payments from there on out. If, however, your bankruptcy trustee or you reject the lease, your past-due rent will be discharged. You will not have to continue paying rent and your landlord will be able to begin eviction proceedings.

Rental Debt Under Chapter 13

A Chapter 13 bankruptcy will allow you to reorganize your debt under a 3 to 5 year repayment plan. With Chapter 13, you will be able to determine if you will assume the lease, pay back the rent owed, and keep your rental or reject the lease. If you decide to assume the lease, your rental and the back-rent you still owe will become part of your repayment plan. After the bankruptcy, as long as you continue to make payments on time, you will be able to stay in the rental. If you do miss payments, however, your landlord will be able to petition the court to lift the automatic stay in order to evict you. If you reject the lease, your landlord will be able to bring eviction proceedings against you immediately.

If you owe back-rent and you are considering filing for bankruptcy, Veitengruber Law can help. We can work with you to determine the best path forward for your specific circumstances.


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