Bankruptcy Case Highlights Treatment of Rent-Stabilized Lease
A number of tenants in New York live in apartments where the rent is stabilized by law for those who continue long-standing residencies. A consumer bankruptcy filing by a 79-year-old widow behind on her bills after the tragic death of her husband poses the issue of whether the lease on such a rent stabilized apartment can be regarded as one of her assets under the law.
She filed a Chapter 7 bankruptcy, seeking to have her current debts dismissed. In such a bankruptcy, however, some assets can be sold to pay creditors if they are regarded as a personal asset. If the rent stabilized lease is regarded as an asset in this manner, there is the possibility that she could lose it and not have such an affordable place to live. It is estimated that millions in New York have such leases.
The bankruptcy trustee in the case thinks it is an asset to be treated in this manner. The legal issue is now being argued before a federal appeals court that will rule on the question. If the court adopts the position of the bankruptcy trustee, the landlords of rent stabilized apartments could have an easier path to evicting tenants who file bankruptcy.
Such a result would be unfortunate for people experiencing financial hardships already, such as those filing bankruptcy. In this case, the elderly widow has been making her rent stabilized apartment her home for half a century. She pays a monthly rent of $703 in an area where typical rents are thousands of dollars more a month. She currently ekes out a living largely on a meager Social Security check. She has no assets to speak of, unless you regard her rent subsidized lease as one.