Rent Arrears and Lease Damages in Bankruptcy

How does bankruptcy actually treat back rent and broken-lease damages?

Money you owe a landlord is a claim, and in most consumer cases it is an unsecured claim — the landlord has no lien on your property to enforce. That puts back rent in the same bucket as credit cards and medical bills, which is the bucket bankruptcy most commonly discharges. Damages for breaking a lease early work the same way, with one added federal limit described below.

In a Chapter 7 case, an unsecured landlord claim is typically paid only from whatever non-exempt assets exist, which in many consumer cases is nothing, and the remaining personal liability is addressed by the discharge. In a Chapter 13 case, the claim is treated with your other unsecured debts through the plan.

One distinction matters more than any other here: a discharge eliminates your personal obligation to pay. It does not decide who has the legal right to occupy the apartment. Possession is a separate fight, governed by § 362 and by your state's landlord-tenant law.

• Back rent already due: unsecured claim, commonly discharged.
• Damages for the remaining lease term: unsecured claim, subject to the § 502(b)(6) cap.
• Rent that comes due after you file and keep living there: a post-petition obligation, not wiped out by the discharge of pre-filing debt.
• Your right to stay in the unit: decided under § 362 and state law, not by the discharge.

Does filing bankruptcy stop an eviction?

Sometimes, and the timing is what decides it. Filing operates as a stay of the commencement or continuation of most actions against you, including efforts to obtain possession of property of the estate (11 U.S.C. § 362(a)). An eviction case that has been filed but not finished is often within that stay.

The critical exception is 11 U.S.C. § 362(b)(22). Where the landlord obtained a judgment for possession against the tenant before the bankruptcy petition was filed, the filing does not operate as a stay of the continuation of that eviction. The Arizona bankruptcy court's public guidance states the practical version plainly: if you file to stop an eviction from a residence you rent, the landlord will be able to continue with that eviction if the landlord obtained a judgment before you filed (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?).

So the honest general rule is: before a possession judgment, the stay commonly reaches the eviction. After one, it commonly does not.

What does federal law say about the landlord's claim amount?

Federal law caps what a landlord can be allowed for lease-termination damages. Under 11 U.S.C. § 502(b)(6), a lessor's claim for damages resulting from termination of a real property lease is disallowed to the extent it exceeds the rent reserved by the lease, without acceleration, for the greater of one year or 15 percent (not to exceed three years) of the remaining term, following the earlier of the petition date or the date the landlord repossessed or you surrendered the property — plus any unpaid rent already due on the earlier of those dates.

Congress explained the purpose directly: the provision is designed to compensate the landlord for his loss while not permitting a claim so large, based on a long-term lease, as to prevent other general unsecured creditors from recovering a dividend from the estate (11 U.S.C. § 502, legislative history).

Two consequences follow. The cap limits future-rent damages, not the rent you already failed to pay. And a security deposit is applied against the claim allowed under this paragraph rather than offset separately.

• The cap is on termination damages, computed from rent reserved without acceleration.
• Unpaid rent already due on the earlier of the petition or surrender date is added on top of the capped amount, under § 502(b)(6)(B).
• A landlord holding a security deposit larger than the allowed claim does not simply keep the excess — the excess comes into the estate.
• The limit does not restrict administrative expense claims for actual use of the premises to which a landlord is otherwise entitled.

What happens to the lease itself — assume or reject?

A lease you are still in is an unexpired lease, and 11 U.S.C. § 365 governs what happens to it. Subject to court approval, the trustee may assume or reject any executory contract or unexpired lease of the debtor. If there has been a default, the trustee may not assume the lease unless the default is cured or there is adequate assurance of a prompt cure, the other party is compensated for actual pecuniary loss from the default, and there is adequate assurance of future performance (§ 365(b)(1)).

That framework explains why a lease in arrears is not simply carried forward untouched. Keeping the lease means the arrears get dealt with, not ignored. Section 365(d)(1) sets the deadline structure for a Chapter 7 trustee's decision on unexpired leases, after which an unassumed residential lease is treated as rejected.

Rejection generates a damages claim — and that claim is exactly what § 502(b)(6) caps. Assumption and rejection are trustee decisions with statutory conditions, not something a tenant elects informally.

Where do state and local rules change the answer?

The Bankruptcy Code sets the framework, but it repeatedly hands the decisive question back to state law. Whether a landlord has a judgment for possession, how quickly one can be obtained, what notice must precede it, and whether you can still cure a default after judgment are all creatures of state landlord-tenant law and local court practice. Two tenants with identical finances in different states can get different outcomes from the same filing date.

Section 362(l) is the clearest example. It provides a certification route for a tenant where applicable nonbankruptcy law permits the tenant to cure the entire monetary default that gave rise to the possession judgment. If your state does not allow that cure, the route is not available to you.

Local bankruptcy rules then add procedure on top. In New Hampshire, LBR 5075-7 requires rent payments under the § 362(l) certification to be made by certified check or money order payable to the lessor and delivered to the Clerk upon filing, with the Clerk transmitting the funds to the lessor. Check your own district and your own state page.

• Whether a post-judgment cure exists at all is state law — and § 362(l) depends on it.
• Districts impose their own mechanics; New Hampshire's LBR 5075-7 specifies the payment form and delivery to the Clerk.
• Relief-from-stay motion requirements are local too: S.D. Ohio LBR 4001–1 requires the motion to state the month and year the arrearage began.
• C.D. Cal. LBR 4001-1 has a specific service rule for residential unlawful detainer motions involving month-to-month tenancies, tenancies at will, or tenancies terminated by an unlawful detainer judgment.
• We do not publish a verified per-state cure rule on this page — see your state page for figures and rules specific to where you live.

What does this look like in practice?

Take three common shapes. First, someone who moved out eight months ago and is being sued by the old landlord for unpaid rent plus the balance of the lease. There is no possession question left — the unit is gone. The claim is unsecured, the termination-damages portion is limited by § 502(b)(6), and both pieces are the kind of debt a discharge commonly addresses.

Second, someone still in the unit whose landlord has served papers but has no judgment yet. Here the automatic stay under § 362(a) commonly reaches the pending eviction, though a landlord can move for relief from stay under § 362(d), and local rules govern how that motion is presented and heard.

Third, someone whose landlord already has a possession judgment. Section 362(b)(22) means the filing generally does not stop that eviction, and the § 362(l) certification route exists only where state law allows curing the whole monetary default. A discharge may still address the money owed even where possession is lost.

• Already moved out: it is a money question, and § 502(b)(6) limits the termination-damages portion.
• Still in the unit, no judgment: the stay commonly applies, subject to a relief-from-stay motion.
• Judgment already entered: § 362(b)(22) applies, and the money and the apartment separate.

What documents and information are involved?

Landlord debts are listed on Schedule E/F, the schedule for creditors who hold unsecured claims. Court guidance is explicit that you must list the claims of all your creditors even if they are contingent, unliquidated, or disputed — a claim is unliquidated where the amount cannot be readily determined, such as by referring to an agreement or a simple computation (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals). A landlord's unresolved damages figure often fits that description, and it still gets scheduled.

Gather the lease itself, including the remaining term, since § 502(b)(6) is computed from the rent reserved and what is left of the term. Collect any eviction paperwork with its dates, any judgment, your payment history, and your security deposit amount.

Filing fees are set nationally. The Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)) plus a $78 administrative fee and a $15 trustee surcharge (Bankruptcy Court Miscellaneous Fee Schedule, Items 8 and 9). The Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)) plus the same $78 administrative fee.

• The lease, showing the term remaining and the rent reserved.
• All eviction filings and any judgment, with dates — the pre-petition judgment date is what § 362(b)(22) turns on.
• Your ledger or payment history and the amount of any security deposit.
• The landlord's current address for notice purposes.
• Any written demand or accounting of claimed damages.

What should you ask a lawyer?

The questions that actually move this situation are narrow and factual, so bring them in that form. The single most important one is whether your landlord holds a judgment for possession, and if so, on what date relative to any filing.

Ask how your state's law treats curing a default after judgment, because that determines whether the § 362(l) certification route is even available. Ask what your district's local rules require if a certification is made, and what the local relief-from-stay practice looks like. Ask how the § 502(b)(6) computation runs on your particular lease term.

Ask about chapter differences for your facts, since a Chapter 13 plan and a Chapter 7 case handle arrears and lease treatment differently. And ask directly about timing — in this area, the gap between filing before and after a judgment can change the outcome more than any other single choice.

• Does my landlord already have a judgment for possession, and when was it entered?
• Does my state allow curing the entire monetary default after that judgment?
• What does my district require procedurally if a § 362(l) certification is filed?
• How is the § 502(b)(6) limit computed on my lease's remaining term?
• How would Chapter 7 and Chapter 13 differ for my arrears and my lease?
• What are the realistic consequences of filing this week versus next month?

Frequently asked questions

Is back rent discharged in Chapter 7?

Back rent is generally an unsecured debt, and unsecured debts are the category most commonly discharged in Chapter 7. Nothing about a landlord makes the debt automatically nondischargeable. What discharge does not do is give you a right to remain in the unit — possession is decided under 11 U.S.C. § 362 and your state's landlord-tenant law, separately from the money.

Can I discharge the money I owe for breaking my lease early?

Yes, that is typically an unsecured claim for damages resulting from lease termination. It is also limited: 11 U.S.C. § 502(b)(6) disallows the claim to the extent it exceeds the rent reserved for the greater of one year or 15 percent (not to exceed three years) of the remaining term, plus unpaid rent already due. A very long remaining term does not translate into an unlimited claim.

My landlord already has an eviction judgment. Does filing help at all?

It generally will not stop that eviction. Under 11 U.S.C. § 362(b)(22), the filing does not operate as a stay of continuing an eviction where the landlord obtained a judgment for possession before the petition was filed. Section 362(l) provides a certification route, but only where state law lets the tenant cure the entire monetary default. The money owed may still be addressed even if possession is not.

What is the § 362(l) certification?

It is a procedure tied to the eviction exception in § 362(b)(22), available where applicable nonbankruptcy law permits a tenant to cure the entire monetary default behind a possession judgment. Local rules add mechanics. New Hampshire's LBR 5075-7, for example, requires rent to be paid by certified check or money order payable to the lessor and delivered to the Clerk when the petition and certification are filed.

Does the landlord get to keep my security deposit?

Not automatically. Under the framework Congress described for § 502(b)(6), the deposit is applied in satisfaction of the claim allowed under that paragraph, rather than offset against actual damages with a separate claim for the balance. Where the landlord holds a deposit exceeding the allowed claim, the excess comes into the estate. The exact treatment in your case is a question for your lawyer.

If I keep living there after filing, do I still owe rent?

Yes. Bankruptcy addresses debts that existed when you filed. Rent for occupancy after filing is a new obligation, and the Code preserves a landlord's entitlement to administrative expense claims for use of the leased premises — the § 502(b)(6) limit expressly does not cut those off. Continuing to live somewhere generally means continuing to owe for it.

Does a landlord have to do anything special to restart collection?

Where the stay applies, a creditor generally seeks relief from stay by motion under 11 U.S.C. § 362(d), and local rules set the requirements. S.D. Ohio LBR 4001–1 requires the motion to state the month and year the arrearage began. C.D. Cal. LBR 4001-1 has a distinct service rule for residential unlawful detainer motions. Requirements vary by district.

What does it cost to file?

The Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), plus a $78 administrative fee and a $15 trustee surcharge. The Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)), plus the same $78 administrative fee. The statute permits installment payment for an individual commencing a voluntary or joint Chapter 13 case; the statutory Chapter 7 waiver is conditional and separate.

Sources

• 11 U.S.C. § 362 — Automatic stay · official source
• 11 U.S.C. § 502 — Allowance of claims or interests · official source
• 11 U.S.C. § 365 — Executory contracts and unexpired leases · official source
• LBR 5075-7 — Debtors Asserting an Exception to the Limitation of the Automatic Stay (D.N.H.)
• S.D. Ohio LBR 4001–1 — Automatic Stay — Relief From and Continuation or Imposition Of
• C.D. Cal. LBR 4001-1 — Stay of 11 U.S.C. § 362
• U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?
• Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9

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