Housing assistance can be impacted by Chapter 7

Millions of people living in Florida and other states around the country rely on some form of housing assistance. Affordable housing options are needed more than ever, as countless families find themselves with limited financial resources and higher living costs. And while low-income housing is a hot commodity, there are rising concerns by many that some forms of housing programs may be subject to Chapter 7 bankruptcy.

It’s estimated that over 2 million people live in rent-controlled units in New York City, New York. One recent study also found that many individuals currently living in rent-controlled housing earn considerably less than other tenants in the city. That’s why the issue of whether or not rent-controlled leases can and should be considered personal assets in Chapter 7 cases is being debated. Unlike other rental leases, stabilized ones can be passed down to heirs and protect renters against potential increases in rent.

One specific case gaining attention around the country involved an elderly woman who may be forced to sell her rent-controlled lease as part of her bankruptcy. A federal appeals court will soon hear the dispute between the woman and her bankruptcy trustee, who claims that rent-controlled leases can be considered assets to be sold to cover bankruptcy debts.

According to the woman’s legal representation, housing assistance like rent-controlled leases should not be considered assets because they are similar to other programs like Social Security. The bankruptcy trustee argues, however, that such leases should be considered no different than personal property or a vehicle. As a result, the trustee is suggesting that the woman sell her lease to cover her debts and pay the trustee. Doing so would mean that the woman may be subject to rent increases or even eviction.

Source: New York Times, “Widow’s Bankruptcy Case Poses Risk to Rent-Stabilized Tenants,” Mireya Navarro, Oct. 20, 2013