According to recently published data, 535,330 Americans had filed for bankruptcy by the end of 2020, with this number being nearly double that of seven years prior . Εvery year hundreds of thousands of Americans decide to file for bankruptcy with the aim of making a fresh financial start and effectively addressing spiraling debt. Even though there are a myriad of reasons that may lead any of us to declare bankruptcy, and each person’s story is unique, bankruptcy filers who do not own their own home often find themselves struggling to pay their rent. What happens with their lease, as well as where they find themselves when it’s time to renew or find a new place, becomes very important.
Residential Tenancy after Bankruptcy in New York
After filing for personal bankruptcy under Chapter 7, Chapter 13, or, more rarely, Chapter 11 of the U.S. Bankruptcy Code , the end result for you should be similar: you will be in a markedly better position than you were before filing, with respect to facing accumulated debt and your ability to make payments.
Even so, considering how difficult it can be to sign a lease for a residential property in New York, combined with the fact that filing for bankruptcy will remain on your credit report for seven to ten years, securing such a tenancy agreement may be even more challenging for individuals who have declared bankruptcy.
Thankfully, having been through personal bankruptcy does not mean that you are destined to be automatically perceived as an “undesirable tenancy candidate,” and thus be unable to rent another property in New York or renew your existing lease post-filing. Many property owners run a credit check before deciding whether to renew an existing lease agreement or offer a new one, irrespective of whether the prospective tenant may have filed for bankruptcy. The two main things that render someone a “good tenant” are, quite simply, their ability to keep up with rental payments and their commitment to maintaining the property in good condition without causing problems.
If you have just come out of Chapter 7 “liquidation” bankruptcy and have had a considerable amount of your unsecured debts discharged, or a Chapter 13 “reorganization bankruptcy” and are proceeding with your structured repayment plan, there are certain things you can do to increase your chances of renewing your lease or signing a new residential rental agreement in New York State as you move forward toward greater financial freedom.
Seize the Momentum
For many filers, Chapter 7 bankruptcy can improve their situation almost immediately after filing, constituting the first major step to a brighter financial future by wiping (so to speak) their financial slate clean. Likewise, Chapter 13 bankruptcy lets individuals with regular income devise a plan for the repayment of all or part of their debts and get their finances in order.
Therefore, having come out of the bankruptcy process should find you in a more financially stable position. This is especially the case if the starting point was being unable to pay your rent because, for example, your paycheck was garnished by a debt collector or lender.
The key here is honesty: communicate that declaring bankruptcy has actually made you a more reliable tenant, as your disposable income no longer has to go toward debt payments or be subject to garnishments. Also, stress the fact that it will now be easier for you to make regular lease payments. A landlord considering your financial situation will, in all likelihood, be more interested in how much disposable income you will have to pay your rent rather than the fact that you filed for bankruptcy. Therefore the issue of income stability is what comes first. Accordingly, it is highly recommended that you offer an indication of your current debt-to-income ratio, which should emphasize how your position has actually improved post-bankruptcy, as your overall debt has been reduced, with a corresponding increase in your discretionary income that can now go toward paying your rent.
You should clearly convey how your financial life has now stabilized, as well as offer some insights into your individual situation: if you are one of the hundreds of thousands of Americans who filed for bankruptcy due to circumstances beyond your control, such as illness, relationship breakdown, change in your employment circumstances, or even death of a loved one, these factors may be pertinent to your assessment as a potential tenant. If you offer prospective (or current) landlords such relevant information about the events that led you to the decision to declare bankruptcy, and—perhaps even more crucially—why such conditions are not likely to occur again in the future, this could help you sign a new rental agreement or renew an existing one.
The main thing to remember is that your current landlord will have become aware of your bankruptcy filing anyway, as they will be in receipt of a copy of Official Form 309A after the filing of your case. Much the same, any potential landlord is also bound to find out about it once they run a credit check. Therefore, being upfront and endorsing the principle of “honesty is the best policy” with regard to your financial situation is by far the best course of action.
When seeking to rent a home after having declared bankruptcy, being organized and up front about your situation is something you should be able to use to your advantage. One of the main things that you will need to show your prospective (or existing) landlord is that your bankruptcy does not—and should not—negate your good, past rental history.
In addition to being able to offer proof of your current disposable income and your corresponding ability to meet rental payments post-bankruptcy, it would be helpful if you could establish that you have been a “good tenant” in the past, meaning that you did not break your leases or rental agreements with other landlords prior to declaring bankruptcy, that you consistently made rent payments on time, etc.
This can be achieved in a number of ways, with the two most obvious ones being:
- Showcase how you used to pay your rent on time before you found yourself unable to make payments, for the reasons it might be worth explaining to prospective landlords. Back this up by providing multiple receipts going back a number of years.
- Have on hand a few references from previous landlords, but also current and/or past employers or business associates. Even personal references from people who would be willing to confirm your reliability and overall conduct may be useful.
Likewise, being able to demonstrate job stability will also be practically helpful, as landlords often expect to get an idea about your employment history, which is generally considered a relevant indication. In this respect, landlords will usually be interested in how long you have been at your current job, whether you are a seasonal or temporary employee, if you are in full-time, permanent employment, your current rate of pay and wage history, and, overall, your previous employment record.
Furthermore, remember that landlords will most probably also look into various other aspects of your credit history, apart from bankruptcy, that may be included in your credit report. For example, they may pay attention to issues such as past evictions, lawsuits or judgments, repossessions, collections, and, of course, late payments or defaults on other debts, such as credit cards. It will be harder for them to accept your application if it emerges that you are still likely to be facing difficulties in meeting your financial obligations based on your past credit history and conduct as a tenant, coupled with your current economic situation. This does not mean you will be unable to find suitable accommodation to rent, but it may indicate that you will need to be more flexible in your search and prepared to make certain concessions.
Be Practical and Prepared to Make Some Compromises
Finding the right property to call “home” is obviously one of the most important aspects of our everyday life. New York, particularly in and around New York City, poses unique challenges in this respect, taking into account the availability and price of residential rental properties in addition to the rigorous tenant selection processes followed by landlords, in general, and property management companies, specifically.
If you are currently in the middle of a bankruptcy filing, or have just come out of the procedure and are seeking to find a residential rental property, it may be worth making some compromises in order to secure a tenancy agreement. Crucially, this may be a short-term solution that will let you get back on your feet and improve your finances.
Some practical tips would be, for example, to consider properties in areas that would not necessarily have been your first choices, such as locations close to colleges or universities. Landlords in such areas, who are used to renting to students, are aware of the fact that they may have little or no credit history to rely upon. Therefore, they may actually be more lenient and willing to consider prospective tenants who do not possess the highest of credit scores. Even if such locations do not have a great appeal for you, this could be a useful, albeit temporary, solution until you get back on track. When you see your finances and credit score improve you will be in a better position to move to a more preferable location. Sometimes settling for less in the short term is better long term, and people can definitely improve their credit profiles and FICO scores over time.
You may also try to narrow down your search to “no credit check apartments.” These do exist, but sticking to them is obviously bound to limit your choices. Such properties are generally favored by applicants who either have a low credit score or who do not actually have an established credit history to show, such as first-time renters or recent immigrants. Landlords who are willing to lease an apartment without running a credit check, or who are more readily willing to accept a low credit score, clearly follow a different approach to that of a “traditional” rental process. Although this does not necessarily mean that there is a scam involved, you should be extra vigilant when considering such options. Be sure to fully understand the reason why the landlord is so keen on finding eager renters and does not feel the need to follow the traditional process.
It is probably going to be easier to rent an apartment from a private owner instead of through a management company. An individual can make their own rules, so to speak, regarding the selection process, as opposed to companies that often have set (and stricter) rules on the credit score and income of prospective tenants. It would, therefore, make sense that a private landlord may be more willing to listen to your story and take into consideration the particular circumstances that led to your bankruptcy filing, especially if these involve, for example, sudden illness, job loss, or other unexpected events that led to your temporary inability to make your rent payments. Recently published figures suggest that 62% of personal bankruptcies in the United States were due to medical expenses  rather than what might be considered “reckless spending.” If your situation is a similar one, explaining it to a prospective landlord may make a big difference.
Consider Other Options
If you find it harder than anticipated to have a rental application accepted or renew your lease agreement, there are several things you could do to increase your chances.
In the past, you could offer to pay a few months’ rent up front toward signing an agreement for the apartment of your choice. This would offer some additional financial backup to the landlord, as well as constitute a gesture of goodwill on your part. This is no longer allowed under New York’s rent laws, which cap a security deposit at an amount equal to one month’s rent . Also, landlords are no longer allowed to collect “last month’s rent” in addition to a security deposit.
Another possibility is finding someone with better credit who would be willing to guarantee the lease for you. It goes without saying that such a move should be pursued under the understanding that you will be able to make your rental payments, rather than risk having a fall-out with your co-signer if you find yourself unable to keep your commitment. Your guarantor/co-signer will be liable for the payments, should you be unable to make them.
Alternatively, even if just as a temporary solution, consider renting a property with a roommate with whom you can share renting expenses. This may not be an ideal setup, but it might be something worth considering if it means you can find a quality place to live in a way that makes financial sense and helps you improve your credit score. Much as two heads are usually better than one, to a landlord, two-plus wallets are often better than one. The caution here is that you will likely be “jointly and severally” liable for the rent, meaning that you and your roommate(s) are jointly (all together) liable for making the monthly payment but, should one person not pay, “severally” means that you are all individually liable for the total. This is definitely an “approach with caution” scenario.
If you feel safe in your choice of roommate, many landlords will “rent rooms,” individually, to people. This can allow you to have a larger apartment with better common areas like the kitchen, living room, and bathrooms, while paying less in rent and splitting the apartment into individual renters, each with their own monthly obligation to pay their rent, separate and apart from their roommates’ payments. Of course, if you do not rent the entire apartment with friends, this could lead to you living with people you do not really know; it’s really a matter of preference, but it is a way in which to reduce your monthly rent payments, especially in a dense, rental-heavy place like New York City. It is definitely advisable to have an attorney review your lease agreement before entering this sort of an arrangement, just to be certain you will not end up jointly and severally liable for the unpaid rent of roommates.
Finally, you could stay with family or friends for a period of time, post-bankruptcy, to save some money, improve your credit score, and find somewhere you like better the next time you rent your own place. Obviously, all of these choices largely come down to a matter of taste, and we are simply presenting them as possible options for someone potentially facing a few tough choices.
Key Takeaways for Renting after Bankruptcy
Even though bankruptcy may impact your ability to find a new rental property or renew your current lease, this does not mean that you have no chance of finding a place to rent again. A bankruptcy filing, along with a low credit score, will be only two of many factors that landlords take into consideration. Besides bankruptcy, there are many other aspects of your credit history, including your employment record and your previous conduct as a tenant, that landlords are likely to consider. These may prove decisive in terms of offering you a lease or proceeding to renew an existing rental agreement.
A less than perfect credit history should not discourage you from putting forward your past rental record, combined with your intentions for the future. You should focus on your good rental history, describe how you have taken care of the property during your tenancy, and commit to continue doing so in the future.
All landlords, be they individuals or property management companies, are primarily looking for tenants who will be able to afford the rent, make regular and timely monthly payments, and preserve the property in good condition without causing any other kinds of problems. If you can show that you are, indeed, this type of renter, you may actually be considered a safer choice of tenant than someone who may have never filed for bankruptcy but is currently finding themselves in arrears and facing eviction.
In the meantime, the most valuable piece of advice anyone can offer you after having declared bankruptcy is to start being as proactive as possible in improving your credit! Having faced grave financial difficulty that led you to file bankruptcy does not mean that you should not continue investing in your future. This includes doing everything possible from your end to make better financial decisions, notwithstanding your past problems. It is never too late—but also never too early—to begin engaging in more responsible money management and building a credit history characterized by timely payments.
Contact Roemerman Law
Bankruptcy may seem like a daunting prospect to many of us, but it may well be the right choice for your situation. It is certainly one meriting serious consideration if you find yourself increasingly unable to meet payments, including those related to accommodation and living expenses.
Discussing your individual needs and circumstances with an experienced bankruptcy professional will enable you to have a more thorough and realistic overview of your options. At the same time, you can seek guidance as to the various anticipated consequences that filing for bankruptcy may have for your particular situation, in terms of your everyday life and living expenses. This includes its potential impact on signing a lease for a residential property or renewing your existing one.
Our team at Roemerman Law is here to help you make an informed decision and make the most of the bankruptcy tools available to your particular circumstances, as well as address any specific concerns you may have.