Written by: Daniel Wagner
Getting word that your tenant has filed for bankruptcy can leave you wondering whether you will ever see the rent you are owed. As a Florida landlord, you still have rights, but federal bankruptcy law puts certain limits on what you can do once a case is filed. Knowing the basic rules helps you protect your property and your bottom line. The path forward depends on which type of bankruptcy your tenant has chosen and where you stand in the process.
Effects of a Chapter 7 Bankruptcy on a Landlord
Chapter 7 is a liquidation bankruptcy where the tenant’s nonexempt assets are sold to pay creditors. For landlords, this usually means past-due rent gets treated as an unsecured debt that may be discharged. The tenant either keeps the lease and continues paying or surrenders the property entirely.
Effects of a Chapter 13 Bankruptcy on a Landlord
Chapter 13 involves a repayment plan that stretches over three to five years. Your treatment as a creditor depends on how the plan handles past-due rent and whether the tenant keeps current on monthly payments going forward:
- Past-due rent is included in the repayment plan
- Ongoing rent paid as a regular expense
- Lease assumed or rejected during the case
- Cure of any defaults over time
- Possible objection to plan confirmation
What Is the Automatic Stay?
The moment a tenant files for bankruptcy, an automatic stay goes into effect. Several common landlord activities are blocked once the stay applies:
- Pursuing landlord evictions for unpaid rent
- Calling or sending letters to demand payment
- Filing or continuing lawsuits for past rent
- Locking out the tenant
- Garnishing wages or bank accounts
Exceptions Allowing an Eviction to Continue
The automatic stay is not absolute. Several exceptions allow landlords to move forward with eviction even after a bankruptcy filing:
- A judgment of possession entered before the filing, where the property is residential and the tenant lives there as a leaseholder
- Endangerment of the property or illegal use of controlled substances on the premises, provided the landlord files a certification under penalty of perjury with the bankruptcy court confirming the conduct occurred, and this exception applies to residential leases only
- A court order lifting the stay after the landlord files a motion for relief
- A non-residential lease that has already expired before the filing
Assumption or Rejection of Lease
Bankruptcy law gives the tenant or trustee the right to either keep the lease or walk away from it. 11 U.S.C. Section 365 governs how leases are assumed or rejected in bankruptcy cases nationwide. The decision usually comes within a set period after filing:
- Assumption: The tenant cures any defaults and continues the lease as written, including paying all amounts owed.
- Rejection: The tenant walks away from the lease, the property is returned, and any remaining damages become an unsecured claim.
Security Deposits
Florida landlords can apply security deposits toward unpaid rent and damages, but the timing and method must respect the bankruptcy court’s rules. Reaching out to the trustee before applying the deposit is often the safest move to avoid running afoul of the automatic stay.
Delayed Rent Payments
Rent that comes due after the bankruptcy filing is generally treated as an administrative expense. That gives it priority over older debts and means the tenant must keep paying current rent on time, even while the bankruptcy case is open.
Contact a South Florida Landlord-Tenant Attorney Today
Worried about how a tenant’s bankruptcy filing affects your rental property? Call Gottlieb Wagner at (305) 919-7788 or reach out online to schedule your consultation with a landlord lawyer in South Florida. Our firm has over 40 years of collective experience helping property owners protect their investments through difficult tenant situations.