Quick answer: Your lease is an unexpired lease under 11 U.S.C. Section 365. You can keep the apartment by staying current and curing any back rent, or walk away by rejecting the lease - which turns the unpaid and future rent into a dischargeable unsecured claim. The one big catch: if your landlord already had an eviction judgment before you filed, the automatic stay usually will not save the tenancy.
Your Lease Is an Asset the Code Can Keep or Discard
A residential lease is an unexpired lease, and Section 365 gives the estate the power to assume it (keep it) or reject it (give it up). For a consumer tenant, that translates into a simple practical choice: keep the apartment or leave it. The right answer depends on whether the lease is affordable and whether you are behind on rent.
Two paths, two outcomes. Assume the lease and you keep the apartment but must cure any default. Reject the lease and you give up the apartment but discharge the back rent and any future-rent damages. The choice is yours to drive, in coordination with the trustee and the plan.
Keeping the Apartment (Assumption)
To keep the lease, any default must be cured. The mechanics differ by chapter:
| Chapter | How you keep the lease |
|---|---|
| Chapter 7 | The trustee rarely has any interest in a market-rate consumer lease. Under Section 365(d)(1), if the trustee does not assume within 60 days of the order for relief, the lease is deemed rejected as to the estate - which in practice just leaves you and your landlord in your ordinary lease relationship. A current tenant generally keeps the apartment by continuing to pay rent. |
| Chapter 13 | You can assume the lease and cure past-due rent through the plan, paying the arrears over time while staying current on ongoing rent. This is a powerful way to save a tenancy that is behind. |
Current rent is not dischargeable away while you stay. If you keep the apartment, you remain responsible for rent coming due after filing - that is the cost of keeping the benefit. Bankruptcy can erase old debt, but it does not let you live in the apartment for free going forward.
Walking Away (Rejection)
If the lease is unaffordable, rejection lets you shed it. Rejection is treated as a breach occurring just before the filing. The landlord's resulting claim - unpaid back rent plus damages for the rent that would have come due over the remaining term - becomes a general unsecured claim:
- The claim is dischargeable like other unsecured debt, so the rent liability goes away.
- The future-rent portion is capped by Section 502(b)(6), which limits a landlord's claim for the rent reserved over the balance of the term to prevent one long lease from swamping the estate.
- You give up possession. Rejection ends your right to stay; you move out.
Rejection is the tool for a tenant who needs out of a lease they cannot afford - it converts an ongoing obligation into a one-time dischargeable claim.
The Eviction-Stay Exceptions - The Critical Catch
Filing bankruptcy triggers the automatic stay under Section 362, which halts most collection and many eviction actions. But Congress narrowed the stay's protection for residential evictions, and these exceptions catch tenants by surprise:
| Exception | Effect |
|---|---|
| 362(b)(22) - pre-petition judgment for possession | If the landlord obtained a judgment for possession before the bankruptcy was filed, the stay does not stop the eviction, unless the tenant uses the narrow cure procedure in Section 362(l) |
| 362(l) - limited cure window | A tenant facing a pre-petition possession judgment can preserve the stay temporarily only by certifying that applicable law allows cure after judgment and depositing the rent that would come due, then actually curing within the statutory window |
| 362(b)(23) - endangerment / illegal drugs | The stay does not apply to an eviction based on endangerment of the property or illegal use of controlled substances on the property |
Timing relative to the eviction judgment is everything. Filing bankruptcy before the landlord obtains a judgment for possession gives the stay its full effect and buys time to assume and cure. Filing after the judgment leaves the tenant with only the narrow Section 362(l) cure path. A tenant facing eviction should understand exactly where the landlord is in the eviction process before deciding when to file.
Deciding - Keep or Leave
The decision usually comes down to three questions:
- Is the lease affordable going forward? If ongoing rent fits the post-bankruptcy budget, keeping makes sense. If not, rejection sheds the burden.
- How far behind are you, and can you cure? Small arrears that can be cured (directly in Chapter 7 or through a Chapter 13 plan) point toward keeping. Large arrears with no realistic cure point toward rejection.
- Where is the landlord in any eviction? A pre-petition possession judgment sharply limits the tenant's options under the Section 362(b)(22) exception, and may make rejection and an orderly move the realistic path.