Clients often ask us “what can we keep if we file bankruptcy?” Or, “do we have to declare all of our assets?” “The house back in the old country doesn’t count, does it?” The bad news is that it all counts. The good news is that most of our clients can exempt all of their remaining assets.
In this submission, we discuss a case in New York regarding rent control. But, if the landlords get their way in New York, what’s next, Social Security? Are food stamps exempt?
Is Your NYC Rent Control Apartment an Asset?
In a case making its way through the federal Appeals Court in New York, this issue is whether a rent “stabilized” apartment, “owned” by a debtor in federal bankruptcy is an asset of the bankruptcy estate.
The case provides a fascinating story of how the landlord is trying to upend rent control in New York. Apparently Mrs. Santiago, a widow, who pays her rent in her rent stabilized apartment in New York City, was forced into bankruptcy because her credit card bills were too overwhelming after her husband died. They owed $23,000. Her landlord filed with the Trustee that he considered the debtor’s rent stabilized apartment an asset and that he would be willing to pay the trustee all of the monies owed to the debtors. He sweetened the deal saying he would allow Ms. Santiago to remain in the unit, but would not allow her 50-year-old son to inherit it.
It’s the trustee’s job to find assets. So, when a landlord offers to pay all of the debts, plus the trustee fee, the trustee is obligated to consider this. However, this is a novel “asset” so the decision to accept this offer has been appealed to the Court of Appeals. However, Ms. Santiago’s lawyers argue that rent stabilization is a public assistance benefit, like social security and food stamps.
In New York City 44% of the rental units are rent stabilized. And there are more units that are subsidized. The median income for folks in the rent-controlled units is significantly lower than in the free market units. Remember, New York City is a special place, where some rents are in the stratosphere.
Unique Asset of Wave of Future for Bankruptcy Exemptions?
Perhaps New York City is a unique case and the outcome of this federal bankruptcy case will not affect the rest of us. But, depending on the outcome, Boston bankruptcy lawyers are paying attention. Will this be a slippery slope and have an adverse effect on Social Security, Food Stamps or other programs?
What other creative lawyering will debtors be looking at? The bankruptcy law has been a rock solid protection for folks needing a “fresh start” and this approach seeks to put a huge setback for debtors. We suggest that New York City find ways to update their rent stabilization laws before folks needing bankruptcy protection loose important protected rights
Hire an Experienced Bankruptcy Lawyer
Before filing for Chapter 7 bankruptcy protection, hire an experienced bankruptcy lawyer. While Mrs. Santiago could not likely have anticipated that her landlord of 50 years, who she pays the rent to every month, would try to evict her so because of her bankruptcy, she has experienced bankruptcy lawyers on her side each step of the way.
Attorney Neil Burns has been using the federal and state bankruptcy exemptions for his clients since 1985. That’s experience.
