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Rent Payments - Post BK Filing Florida Lease agreements


Paradise954
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@WhoCares1000

Note: my case was chapter 7. No asset case.

First, spoke with attorney and was advised most importantly that they cannot sue me for any amount above my security deposit. So if they attempt to collect above that, they may very well subject themselves to legal problems. I was advised by my attorney that I have to dispute under state tenant/landlord law for their claims of damages they are trying to offset against the deposit for the cost of repainting the apartment and charges to replace entire carpeting. What is important to note here and part of my argument with their offsetting for the painting and carpeting replacement is that 2 weeks prior to us vacating this apartment there was an electrical fire caused by the failure of the air conditioner which resulted in smoke damage to the apartment (walls and carpeting included) and my personal belongings. The LL never offered nor took any action to correct the damage resulting from the fire (cleaning, deodorizing, etc). I'll just leave it at that.

They technically can offset for post petition rent but seeing we paid rent until the time we elected to reject the lease, nothing there to offset against as we vacated at that time. They are trying to offset for some "concession" charge (can not locate any clause in the lease agreement which provides their right to this) and charges for a lease termination fee which totals one month's rent which I opinion is not proper and requested proof from them to prove their legal right to do so without violating my discharge order and 11 USC 524.

I will just wait and see what they come back with. Also, I think some of the laws you discuss below main pertain to commercial, non-residential bk? I have read same. Look more at residential leases as I believe there are differences between the two types, no -residential and residential leases?

To answer your questions.... Deposit was for one month rent...we had five months remaining and moved out at time of rejecting said lease...... At the end of the day, I am well content with losing deposit, but had to dispute certain claims of damages and let them prove their legal right to do so. My language in my letter was cordial and polite. No threats. No finger pointing etc etc as that would get me no where. I just stuck to the facts of the matter and clearly explained my reasons for disputing their claims pursuant to state tenant/landlord law.

OK, first off, whatever your sentiments of the landlord do not fall into play. Even when you do not have the extra baggage of a BK, it is sometimes easier to let the deposit go rather than fight for it.

That said, there are many issues involved here and we would need more answers to the questions than you have given us to say for certain what kind of case you have. Even then, there is quite a bit of uncertainty legally surrounding rental deposits that an attorney would be consulted.

The questions are these:

  • Did the deposit consist of 1 or 2 months rent. One months rent
  • Did you move out at the end of the month that you declared BK or did you stay for an extra month or 2 paid rent until we moved out
  • How many months were left on the lease when you moved out 5 months
Based on what I could find, the rules are as follows

  • If a tenant remains in the apartment for any months after they filed for BK, regardless of whether they reject or assume the lease, they are still responsible in full for those months as that is considered post petition debt. An example would be that you filed for BK in July and remained in the apartment in August. You are responsible for August and that is not included in the BK or the automatic stay. This is also called administrative debt
  • If a tenant rejects the lease, all rent payments due because the lease has been broken become pre petition debt subject to the rules of BK. However, the law says that the landlord can only claim 15% of the total amount due under the lease. In the 9th circuit, the 15% is calculated based on time remaining (for example, if 6 months remained on the lease, the landlord would be entitled to 90% of a month). In the other circuits, the 15% is based on amount (again, 6 month example, $1200/month rent, the amount due the landlord would be $1080). The landlord can file a claim for that amount if the case is an asset case.
  • I could not find any information regarding damages and whether they are pre petition or post petition debt
  • When it come to security deposits, outside of the 9th circuit, a landlord can keep a security deposit and apply it first to the administrative rent debt (post petition rent), pre petition rent claim (the amount the landlord could claim in an asset case), and then damages. The OP is not in the 9th circuit
So lets say that you filed for BK in July and stayed in the apartment in August and you had 6 months to go on the lease. Your rent was $600 and the deposit was $1200. If we follow this, then out of the deposit would come $600 for August's rent, $540 for the pre petition debt. That is $1140 leaving $60. All the landlord has to prove is $60 in damages and that the damages were post petition debt which the landlord could possibly claim. That leaves for a violation only the pre petition debt beyond the 15% described above. This also puts you at the mercy of who your judge is. It is possible that the judge could rule that the violation was not willful and hence, you are only entitled to the terble damages of $180 and no legal fees meaning you spent a ton of money and time to get $180.

Hence, my advice to remind the landlord of the BK and to seek out legal counsel before going any further and not to worry about the security deposit. In your case, you do not really have unclean hands to make a point, unlike the family you mentioned in your example of what a jerk the landlord is.

OK, first off, whatever your sentiments of the landlord do not fall into play. Even when you do not have the extra baggage of a BK, it is sometimes easier to let the deposit go rather than fight for it.

That said, there are many issues involved here and we would need more answers to the questions than you have given us to say for certain what kind of case you have. Even then, there is quite a bit of uncertainty legally surrounding rental deposits that an attorney would be consulted.

The questions are these:

  • Did the deposit consist of 1 or 2 months rent
  • Did you move out at the end of the month that you declared BK or did you stay for an extra month or 2
  • How many months were left on the lease when you moved out
Based on what I could find, the rules are as follows

  • If a tenant remains in the apartment for any months after they filed for BK, regardless of whether they reject or assume the lease, they are still responsible in full for those months as that is considered post petition debt. An example would be that you filed for BK in July and remained in the apartment in August. You are responsible for August and that is not included in the BK or the automatic stay. This is also called administrative debt
  • If a tenant rejects the lease, all rent payments due because the lease has been broken become pre petition debt subject to the rules of BK. However, the law says that the landlord can only claim 15% of the total amount due under the lease. In the 9th circuit, the 15% is calculated based on time remaining (for example, if 6 months remained on the lease, the landlord would be entitled to 90% of a month). In the other circuits, the 15% is based on amount (again, 6 month example, $1200/month rent, the amount due the landlord would be $1080). The landlord can file a claim for that amount if the case is an asset case.
  • I could not find any information regarding damages and whether they are pre petition or post petition debt
  • When it come to security deposits, outside of the 9th circuit, a landlord can keep a security deposit and apply it first to the administrative rent debt (post petition rent), pre petition rent claim (the amount the landlord could claim in an asset case), and then damages. The OP is not in the 9th circuit
So lets say that you filed for BK in July and stayed in the apartment in August and you had 6 months to go on the lease. Your rent was $600 and the deposit was $1200. If we follow this, then out of the deposit would come $600 for August's rent, $540 for the pre petition debt. That is $1140 leaving $60. All the landlord has to prove is $60 in damages and that the damages were post petition debt which the landlord could possibly claim. That leaves for a violation only the pre petition debt beyond the 15% described above. This also puts you at the mercy of who your judge is. It is possible that the judge could rule that the violation was not willful and hence, you are only entitled to the terble damages of $180 and no legal fees meaning you spent a ton of money and time to get $180.

Hence, my advice to remind the landlord of the BK and to seek out legal counsel before going any further and not to worry about the security deposit. In your case, you do not really have unclean hands to make a point, unlike the family you mentioned in your example of what a jerk the landlord is.

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What part of the BK law permits them to offset the security deposit? Just curious as they are attempting to offset against the security deposit for termination fees, late fees, some "concession" amount, etc.

Clear violation of discharge per section 524 of BK code?

 

11 U.S.C. 553.  http://www.law.cornell.edu/uscode/text/11/553

 

When you owe them and they owe you and you file a bk, then adios deposit.

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What I am trying to say though is that you might not be in a position to cause much of a fight. Most, if not all, of your deposit is eaten by the pre petition claim the landlord would have had if the case had been an asset case. The landlord can use the deposit to cover the debt in the same way that a bank can take a house or car to cover a secured note. The only thing you have is that the landlords pre petition claim is limited to 15% of the amount due on the lease when it was broken and maybe damages (but I am unsure if those are pre petition or post petition).

What I am saying is that you might spend thousands of dollars on a lawyer to fight this landlord with very little return. Better to send a polite letter to the landlord to tread carefully and consult with an attorney before trying to collect on this debt. If he decides to go further, then certainly, hit him on the head. Otherwise, just walk away. The security deposit is good as gone. Move on.

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@WhoCares1000

Good point. Thanks. I did send polite letter. See my earlier post.

Check this case regarding post-petition rent and BK. Case was here in Florida. Curious of your thoughts. Google the following:

Peggy A. Miller v. Chateau Communities, Inc.

What I am trying to say though is that you might not be in a position to cause much of a fight. Most, if not all, of your deposit is eaten by the pre petition claim the landlord would have had if the case had been an asset case. The landlord can use the deposit to cover the debt in the same way that a bank can take a house or car to cover a secured note. The only thing you have is that the landlords pre petition claim is limited to 15% of the amount due on the lease when it was broken and maybe damages (but I am unsure if those are pre petition or post petition).

What I am saying is that you might spend thousands of dollars on a lawyer to fight this landlord with very little return. Better to send a polite letter to the landlord to tread carefully and consult with an attorney before trying to collect on this debt. If he decides to go further, then certainly, hit him on the head. Otherwise, just walk away. The security deposit is good as gone. Move on.

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@jq26

Check this case via Google

Peggy A. Miller v. Chateau Communities, Inc.

11 U.S.C. 553.  http://www.law.cornell.edu/uscode/text/11/553

 

When you owe them and they owe you and you file a bk, then adios deposit.

11 U.S.C. 553.  http://www.law.cornell.edu/uscode/text/11/553

 

When you owe them and they owe you and you file a bk, then adios deposit.

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Interesting except for one problem, this case was heard in 1999, the bankruptcy laws were redone in 2005 and from what I have read, part of the redo was to address the issues in cases such as this.

Congress can and does overrule the courts by changing the law when courts rule in a way that was not their real intent or issues brought up in court that were unexpected. This happens all of the time.

Prior to 2005, there were professional tenants who, upon receiving a judgement for eviction, would file for bankruptcy putting their eviction in limbo and they would be able to reside in the place rent free while the landlord was stopped by the automatic stay. Cases such as this were common and frustrating.

Come 2005, the bankruptcy laws were overhauled. As part of that that overhaul, the laws were changed so that tenants could not live in an apartment rent free during the bankruptcy case. It defined time limits on the assumption or rejection of a lease, it allowed landlord to receive a removal of the automatic stay in cases where they had already obtained a judgement for eviction, and it allowed landlords to collect rents post-petition (which is really fair because any other creditor who offers to loan you money the day after you file for BK can collect too). To get this approved, the deal made was that landlords were limited to 15% and that all lease termination fees and completion fees become pre-petition debt.

So in reality, this case has no bearing anymore because congress changed the laws. Try to find a case after the 2005 changes and then we can talk. Otherwise, you will be making case law. You could receive court costs if you win but could be responsible for your old landlord's court costs if you lose. It will also take years to wind through the system.

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Come 2005, the bankruptcy laws were overhauled. As part of that that overhaul, the laws were changed so that tenants could not live in an apartment rent free during the bankruptcy case. It defined time limits on the assumption or rejection of a lease, it allowed landlord to receive a removal of the automatic stay in cases where they had already obtained a judgement for eviction, and it allowed landlords to collect rents post-petition (which is really fair because any other creditor who offers to loan you money the day after you file for BK can collect too). To get this approved, the deal made was that landlords were limited to 15% and that all lease termination fees and completion fees become pre-petition debt.

 

 

1) assumption or rejection of lease = deadline is 90 days from date of filing

2) if judgment obtained for eviction, then NO STAY is ever in place.  (I filed a case 10 minutes before judgment two weeks ago for a client in order to avoid this problem).

3) In PA, which is where most of my cases are located, rent accrues post-petition after the 90 day period.   So essentially free rent for 90 days then damages can accrue.   This has not been fully flushed out yet.  Landlords need to time their motion for relief to lift the stay in order for a hearing to be held around the 90 day mark, then file a complaint to evict in state/local court. 

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1) assumption or rejection of lease = deadline is 90 days from date of filing

2) if judgment obtained for eviction, then NO STAY is ever in place.  (I filed a case 10 minutes before judgment two weeks ago for a client in order to avoid this problem).

3) In PA, which is where most of my cases are located, rent accrues post-petition after the 90 day period.   So essentially free rent for 90 days then damages can accrue.   This has not been fully flushed out yet.  Landlords need to time their motion for relief to lift the stay in order for a hearing to be held around the 90 day mark, then file a complaint to evict in state/local court. 

Does not the rejection of the lease nullify it in its entirety?   Making is essentially worthless (meaningless) in terms of LL recovering such things as termination fees?   For example, in my chapter 7 no-asset BK,  I rejected my AT&T cell phone contract which was a two year deal with a $350 termination fee if I cancelled. Upon speaking to AT&T's bankruptcy department they advised me that the contract was null and void and they could not collect any termination fee, basically there was nothing they could enforce from contract as it was dead upon rejection. (they promptly cancelled my cell phone service).    Seeing this is an executory contract by nature, as is a residential lease contract, would not a residential lease be worthless upon rejection?    

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Again, when it came to residential leases, the laws were changed in 2005 to prevent some abuses.

 

The landlord would be in the same position as AT&T only if they did not have a deposit which is essentially an asset of yours with a lien attached to it (the lien is that in order to receive the asset back, you have to perform according to the lease). AT&T had no such lien because they did not have a deposit which means they are out of luck. This is similar to your home with a mortgage attached to it. The lien is still valid (unless you take some sort of action to remove the lien) after the BK and the bank can still take the house. That is all they get for the debt.

Unlike AT&T though, a residential landlord is limited to 15% of the pre-petition debt as a claim. Since that is the landlords, claim, that would be all they could take out of a deposit after the case has closed. Hence the landlord would be entitled to 15% of the lease termination fees plus damages. With the lien on the deposit, the landlord can take the deposit to cover those costs.

I have to ask, what did your BK lawyer tell you regarding this situation? If they said to not bother, think why they would have said that? The reward may not be worth the risk, even if this landlord is the jerk you make him/her out to be. jq26 even said that because of the new laws, this is an area that needs to be judicially fleshed out. That means that you would need to probably set a precedent which costs money for legal fees. There is the risk that you will not win and if you don't, not only will the landlord be able to keep your deposit but could go after you for attorneys fees for these cases. The max you can get out of this is 3x your full deposit if you win. What is the max you will have to pay if you lose? That might run into the tens of thousands. Appeals lawyers are not cheap.

Like I said before, you are not coming at this with totally clean hands (your hands may be clean in the eyes of the law but even that you are not sure). The best bet therefore is limit your loses by walking away. If you go back to the table, the croupier might be able to take you for the ride of your life and you have already used up your chapter 7 BK card for the next 8 years.

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