Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Can I keep my house if I file bankruptcy?”
New York State’s Court of Appeals ruled on Thursday that rent-stabilized leases are a public benefit and therefore cannot be seized as assets of persons who are going through bankruptcy.
Rent-stabilized leases allow millions of tenants in New York City and elsewhere to make rental payments based on their income as opposed to market-based rental prices. In many cases, state or municipal authorities make up the difference, rendering payment to landlords who agree to certain terms and conditions regarding protections for rent-stabilized tenants.
The case in New York arose when an 80-year-old widow named Mary Veronica Santiago filed for bankruptcy after amassing—in relative terms—a small credit card debt. In essence, Mrs. Santiago’s lease was “grandfathered” by a succession of landlords, who allowed her to continue to pay $703 per month to rent the apartment where she has lived for over 50 years.
During that time, the market value of renting the apartment rose as high as three to four-thousand dollars per month. Mrs. Santiago qualified for one of New York’s rent stability programs, and her rental agreement was subject to its terms.
After Mrs. Santiago filed for bankruptcy, one of her creditors offered to purchase her lease in exchange for paying off her debts. The creditor promised to allow Mrs. Santiago to continue living in the apartment until her death. The trustee in charge of Mrs. Santiago’s bankruptcy accepted the creditor’s offer, but Mrs. Santiago’s lawyers objected, arguing that rent-stabilized leases were not “assets” that could be marshaled to pay debts in a bankruptcy.
In practical terms, the only effect the decision had on Mrs. Santiago concerned whether her heirs at law or pursuant to a will, if any, would take her interest in the lease upon her death, or whether her creditors would be entitled to the lease.
Writing for the five-judge majority of the New York Court of Appeals—Judge Sheila Abdus-Salam wrote that the purposes and effects of the rent-stability program left no doubt that Mrs. Santiago’s rights under the lease constituted “a local public assistance benefit,” which exempted the lease from being considered an “asset” for bankruptcy purposes.
Bankruptcy lawyers, New York State and local officials all worried that allowing rent-stabilized leases to be considered “assets” in bankruptcy proceedings would “undermine the safeguards that both bankruptcy and rent laws are supposed to provide,” according to the New York Times.
According to a number of New York bankruptcy attorneys, landlords would find it easier to break rent-stabilized leases and evict tenants—even tenants who had paid their rents on time.
State Assemblywoman Linda B. Rosenthal introduced a bill two years ago in the state legislature that would have prohibited considering rent-stabilized leases as assets.
Rosenthal told the Times that people should not have to risk losing their homes simply because they file for bankruptcy. She said she was delighted by the court’s decision.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
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