The Limits of "Don't Pay Another Dime"
It’s pretty common advice for us to give our clients, “once you’ve decided to file a bankruptcy case, don’t incur any more debt and don’t pay on any more debt.” In other words, don’t throw good money after bad. The advice is sound when the debt in question is a credit card, personal loan, or medical bill. It’s even good advice when making plans to surrender a car or home back to the bank – they’ll send the tow truck to pick up the car eventually, you might as well enjoy a few months of free driving while setting aside money for a new one. But what about a residential lease or rental agreement? Of course, if an individual intends on keeping a lease or rental agreement in place, there’s no question that the landlord must be paid. If a debtor wants the continued benefit of an agreement, he has to keep paying for it. But what if a tenant plans on leaving an apartment? Can he stay in the apartment until evicted and discharge any unpaid rent in his bankruptcy case? The answer is, frustratingly: sometimes. Unpaid rent that has accrued prior to an individual filing a bankruptcy is discharged in the case. However, unpaid rent or lease payments that accrue after a bankruptcy has been filed become a priority debt that the landlord is entitled to pursue both during and after a bankruptcy case. That is a different result than when mortgage payments aren’t made after a bankruptcy case is filed. In those cases, all of the liability is discharged. It’s also different from a standard car payment. Car payments left unpaid, even after a bankruptcy case is filed, are swept into the case once the car is repossessed. But leases and rentals work differently, and the length of post-bankruptcy time in which a debtor enjoyed the benefit of leased property can follow him long after a bankruptcy case concludes.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.
