What if I’m a property manager or landlord?
June 28, 2022
By Diane Drain Attorney & Retired Law Professor
- (1) Residential real estate or personal property: Chapter 7 — The debtor/trustee has 60 days to assume or reject the lease after filing the bankruptcy. Rents must be brought current if the lease is accepted. Section 365 (2)(p) If a lease is not assumed within 60 days, it is immediately considered rejected. Sadly, even when the lease has expired, the landlord is still unable to take action against the debtor or his personal property without first filing an motion for relief. As a result, it’s a good idea to file a motion for relief as soon as the debtor files for bankruptcy in a lease. Chapter 11, 12, or 13 – the trustee/debtor has the option to assume or reject the lease at any point until the Plan is confirmed.
- (2) Non-residential real property – trustee must assume within 120 days of filing bankruptcy or order confirming Plan; court can extend for another 90 days. Section 365(d) (4). Previously assume lease, then refused – potential administrative claim, see 503(b)(5).
There is no automatic stay under Section 362(b)(22):
- if the landlord obtained a judgment for possession of residential property prior to the bankruptcy filing.
- If the debtor had a prior bankruptcy (7, 1 or 13) ongoing in the previous 12 months, Section 362(c)(3)(A) states that the automatic stay on any lease may be lifted 30 days after filing the bankruptcy.
- If the debtor has filed two or more cases in the last 12 months, there is no automatic stay.
Be cautious: this is a new law that could “bite the landlord in the arse.” I strongly advise speaking with an experienced creditor attorney .
Trustee may assign the lease despite non-assignment clauses Section 365(f). Landlord may not use the filing of a bankruptcy as grounds for terminating a lease 365(e)(1).
About the Author: Diane Drain
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
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