Brenner Spiller & Archer

Addressing Rental Arrears in a Chapter 13 Bankruptcy

meeting with a bankruptcy lawyer, 2 men at a desk

Rental arrears – a term that can send chills down the spine of any tenant. Unpaid rent can lead to a cascade of problems, including eviction, legal actions, and damaged credit scores. But there’s a light at the end of the tunnel, and it’s called Chapter 13 bankruptcy. In this article, we’re going to dive deep into how Chapter 13 bankruptcy can help you address those looming rental arrears and how to regain your financial footing.

Understanding Chapter 13 Bankruptcy: A 2nd Chance

Chapter 13 bankruptcy is like a financial reboot, offering individuals a way to reorganize their debts and establish a manageable repayment plan. 

Rental Arrears and Their Implications: The Monster Under the Bed

Before we dig deeper into Chapter 13, it’s essential to understand the monster we’re dealing with – rental arrears. Rental arrears are simply unpaid rent that accumulates over time. Their implications are more significant than you might think.  Once you fall behind in your rent payments, your landlord will most likely have to serve/mail you a Notice to Quit.  Once the Landlord waits for the applicable time period, they can then file a Verified Complaint seeking a judgment of possession.  If the Landlord obtains a judgment of possession, then they can take steps to have the tenant evicted. 

Chapter 13 Bankruptcy as a Solution: TIMING IS EVERYTHING

Chapter 13 bankruptcy is the lifeboat that saves tenants from the sinking ship of rental arrears. Let’s take a closer look at how it can help.  When you file a Chapter 13 Bankruptcy the automatic stay applies.  This is the shield you carry into your battle that stops creditors from collecting against you.  The automatic stay puts a hold on the landlord/tenant case that was filed in Superior Court.  Your next step is to file a Plan with the Bankruptcy Court informing all parties of your intentions.  The most basic plan for rental arrears is to pay them back.  Once your case is filed, you will resume regular rental payments and bankruptcy plan payments the very next month for a period of three to five years. 

Do not wait too long to file.  This is the key to everything.  You must file your bankruptcy before the judgment of possession is entered.  

Filing Before Judgment of Possession

If you file your bankruptcy before the judgment of possession is entered in Landlord-Tenant court, then you must pay back your missed rental payments timely.  In New Jersey, this typically means in the first eighteen months after you file your bankruptcy.  

Filing After Judgment of Possession 

This is a game changer and most tenants do not have the ability to complete this bankruptcy.  If the judgment of possession is entered in landlord-tenant court, then on the day you file your Chapter 13 bankruptcy, you must travel to the Bankruptcy Court and deposit one month’s rent.  This payment is for the next rental due after the bankruptcy is filed.  You then have thirty days to pay the landlord directly all past due rental payments.  

In a world full of financial challenges, Chapter 13 bankruptcy is your superhero against the villain of rental arrears. It’s not just a lifeline; it’s a chance to regain control and peace of mind. If you’re facing the daunting prospect of rental arrears, consider the path of Chapter 13 bankruptcy, just as many have done. It could be your way back to financial stability and the comfort of home sweet home.