Residential Leases in Bankruptcy: Keeping or Ending Your Apartment Lease

How does a residential lease actually get handled in bankruptcy?

A lease with time remaining on it is an "unexpired lease." Under 11 U.S.C. § 365(a), the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor. Assumption means the lease continues on its terms. Rejection means the estate walks away from it, and the landlord is left with a claim for damages rather than an ongoing obligation of the estate.

In practice, most consumer apartment leases have little value to a bankruptcy estate, so trustees frequently take no action at all. That inaction has a consequence built into the statute rather than left to guesswork: a residential lease that is not timely assumed in a Chapter 7 case is deemed rejected. Many tenants who are current on rent continue paying the landlord and continue living in the unit. Rejection is a decision about the estate's rights, not by itself an order that anyone move out. What happens next generally depends on state landlord-tenant law and on whether rent keeps getting paid.

• Assume = the lease continues, with defaults addressed first.
• Reject = the estate releases the lease; the landlord holds a damages claim.
• Do nothing in Chapter 7 = deemed rejected once the statutory period runs.

What changes the answer for your lease?

Four facts drive almost every version of this question, and they are worth writing down before you talk to anyone.

First, are you current on rent? A default triggers the cure requirements of 11 U.S.C. § 365(b) and narrows what is possible. Second, has the landlord already gone to court? An eviction judgment entered before you file is treated very differently from a landlord who has not yet started a case. Third, which chapter are you considering? The timing rules and the practical mechanics differ between Chapter 7 and Chapter 13. Fourth, do you actually want to stay? Rejecting a lease you cannot afford can be the point of filing rather than a loss.

One more variable is local. Bankruptcy courts publish their own local rules and procedures for lease motions and for eviction-related certifications, and those procedures differ from district to district.

What does federal law actually say about assuming or rejecting a lease?

Three provisions carry most of the weight. 11 U.S.C. § 365(a) gives the trustee, subject to court approval, the power to assume or reject an unexpired lease. 11 U.S.C. § 365(b)(1) sets the conditions when there has been a default: the trustee may not assume unless, at the time of assumption, the trustee cures or provides adequate assurance of promptly curing the default, compensates or provides adequate assurance of promptly compensating the other party for any actual pecuniary loss resulting from the default, and provides adequate assurance of future performance under the lease.

11 U.S.C. § 365(b)(2) then carves out defaults that do not have to be cured — including a default that is a breach of a provision relating to the insolvency or financial condition of the debtor, the commencement of a bankruptcy case, or the appointment of a trustee. Those "you filed bankruptcy, so you breached" clauses are addressed directly by the statute.

On timing, official district guidance describes 11 U.S.C. § 365(d)(1) as providing that if the trustee in a Chapter 7 case does not assume or reject an unexpired lease of residential real property within 60 days after the order for relief, or within additional time granted by the court, the lease is deemed rejected.

Where do state and local rules make a difference?

Bankruptcy is federal, but the lease itself, the eviction process, and your rights as a tenant come largely from state law and from your landlord-tenant court. Federal law decides whether the estate keeps or releases the lease; it does not rewrite the underlying tenancy.

Local bankruptcy rules matter too, and they are genuinely different from district to district. In the Eastern District of New York, a Chapter 7 trustee moving to assume a residential lease is directed to obtain a hearing date within 60 days after the order for relief, and the rule sets out how an extension under § 365(d)(1) is requested (E.D.N.Y. LBR 6006-1). The District of Massachusetts requires a motion to extend that deadline to be filed before the § 365(d)(1) period expires, with interim approval available if the court cannot reach it in time (D. Mass. LBR 6006-1). The Middle District of Florida treats these as negative-notice motions in Chapters 7, 12, and 13 with a 21-day response period.

Check your own district's local rules and your state hub before assuming any of this applies to you.

What does this look like in practice for a real tenant?

Consider someone current on rent who wants to stay. Their lease is an unexpired lease, no default triggers § 365(b), the trustee most likely does nothing, the lease is deemed rejected after the statutory period, and they continue paying the landlord and living there. Nothing dramatic happens.

Now consider someone two months behind. Assumption is no longer simple: under § 365(b)(1) the default would have to be cured or promptly cured, the landlord compensated for actual pecuniary loss, and adequate assurance of future performance provided. That is a real obligation, not a formality, and whether it is achievable depends on income and on what the landlord has already done.

Now consider someone whose landlord already won an eviction case. Official guidance from the District of Arizona states that if you file for bankruptcy in order to stop an eviction from a residence you rent or lease, the landlord will be able to continue with that eviction if the landlord obtained a judgment before you filed your bankruptcy case. That is the hardest version of this problem, and the one where speaking to a lawyer quickly matters most.

What documents and information are involved?

Gather the paperwork before anything else. You will want a complete copy of the lease or rental agreement, including any renewals or extensions, since the term remaining is what makes it an "unexpired" lease at all. You will want a rent ledger or payment history showing exactly what is owed and through what date, because the cure figure under § 365(b)(1) is a number, not an estimate.

If your landlord has filed anything in state court, keep copies of the complaint, any judgment, and any writ. Vermont's local rules illustrate how specific this gets: a debtor with a pre-petition eviction judgment who wants to remain in the property is directed to file Official Form 101A with the certification section completed, a copy of the pre-petition judgment of eviction, a copy of the lease or an affidavit specifying the monthly rent, and a sum equal to one month's rent payable to the lessor in the form of a bank check, attorney trust account check, or money order (Vt. LBR 4001-2).

Also keep security deposit records. 11 U.S.C. § 502 addresses how a landlord's deposit interacts with an allowed claim.

• The full lease, plus renewals and extensions
• A rent ledger showing the exact arrears and through-date
• Any state court eviction filings, judgments, or writs
• Security deposit records and receipts
• Proof of current income, for any discussion of future performance

What should you ask a lawyer about your lease?

Bring the documents and bring specific questions. Vague questions get vague answers, and this is an area where the details decide the outcome.

Ask whether your particular arrears can realistically be cured, and over what period, given your income. Ask what your district's local rules require if the landlord has already obtained a judgment, and what deadline you are already inside. Ask how a rejection would affect your ability to rent again in your area, which is a practical question rather than a bankruptcy question. Ask whether your landlord's damages claim is capped, and what that means for you personally — 11 U.S.C. § 502(b)(6) limits a lessor's claim for damages resulting from lease termination to the rent reserved, 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 and the date the lessor repossessed or the lessee surrendered the property, plus unpaid rent due on the earlier of those dates.

Ask, finally, what happens to your deposit.

Frequently asked questions

Can I keep my apartment if I file bankruptcy?

Many tenants do keep renting. A lease with time left on it is an unexpired lease under 11 U.S.C. § 365, and filing does not automatically end it. If you are current on rent and keep paying, the common outcome in a Chapter 7 case is that the trustee takes no action and the lease is deemed rejected as to the estate while you continue living there under state law.

What does it mean that my lease was "deemed rejected"?

It means the bankruptcy estate released its interest in the lease because no one assumed it in time. Under the timing rule described in 11 U.S.C. § 365(d)(1), a residential lease not assumed within 60 days after the order for relief in a Chapter 7 case is deemed rejected. That is a statement about the estate's rights. It is not, by itself, an eviction order or a direction that you move.

I'm behind on rent. Can the lease still be assumed?

It can be harder. 11 U.S.C. § 365(b)(1) provides that where there has been a default, the trustee may not assume unless the default is cured or promptly cured with adequate assurance, the other party is compensated for actual pecuniary loss, and adequate assurance of future performance is provided. Whether that is achievable depends on the arrears amount and your income. Discuss it with a lawyer before assuming either answer.

My landlord already has an eviction judgment. Does filing stop it?

Not automatically. Official guidance from the District of Arizona states that if you file in order to stop an eviction, the landlord will be able to continue with that eviction if the landlord obtained a judgment before you filed. Several districts have specific certification procedures for this situation — Vermont, for example, requires Official Form 101A, the judgment, the lease, and one month's rent. Move quickly and get advice.

Can my landlord terminate the lease just because I filed?

The Code addresses that kind of clause directly. Under 11 U.S.C. § 365(b)(2), the cure requirements do not apply to a default that is a breach of a provision relating to the insolvency or financial condition of the debtor, the commencement of a bankruptcy case, or the appointment of a trustee or custodian. Those provisions are commonly called ipso facto clauses. How they play out in your case is a question for counsel.

How much can my landlord claim if the lease ends?

11 U.S.C. § 502(b)(6) caps it. A lessor's claim for damages resulting from termination of a real property lease is limited to the rent reserved, 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 and the date the lessor repossessed or the lessee surrendered the property, plus unpaid rent due on the earlier of those dates.

Is the process different in Chapter 13 than in Chapter 7?

The lease provisions of 11 U.S.C. § 365 apply across chapters, but the timing and mechanics differ, and Chapter 13 involves a repayment plan and a trustee handling payments. Some districts address preconfirmation lease payments by local rule. We don't publish a verified plan-treatment figure for every district, so ask a lawyer in your district how a residential lease would be handled in a Chapter 13 plan.

What does filing cost?

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. Attorney fees are separate and vary.

Sources

• 11 U.S.C. § 365 — Executory contracts and unexpired leases · official source
• 11 U.S.C. § 362 — Automatic stay · official source
• 11 U.S.C. § 502 — Allowance of claims or interests · official source
• Bankr. M.D. Fla. Procedure Manual — Motion to Assume or Reject Executory Contracts and Unexpired Leases
• E.D.N.Y. LBR 6006-1
• D. Mass. LBR 6006-1
• Vt. LBR 4001-2
• U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)

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