I came home today to find a notice that I am one of the 20 largest unsecured creditors to an entity filing for chapter 11 bankruptcy, and that I have a chance to serve on a reorganizing committee. The entity is my apartment complex. Their only debt to me is my security deposit, and, I suppose, my right to live here through the end of April.
Questions:
A) How much time does such a committee take of my life? More than 5 hours? If so, is it worth it for $1300 of debt?
B) When something like this goes under, do I lose my residence? I imagine not…I imagine I might lose my security deposit, but I’m probably good to stay here for 6 months, right?
C) If I do lose my security deposit, I’m probably out of my lease, too, right?
D) Does this affect me in any way over the next 5-6 months?
I am in the same boat. My 200-unit apartment complex received a Notice of Default that expired a few days ago and it looks like the place will go up for auction at the courthouse in a few weeks. We have a lease for another 9 months and a deposit (paid by credit card). We’ll see.
It’s highly likely - though by no means absolutely certain - that whatever person or organization ends up owning the building will be very pleased to have tenants in it (and to receive their rent checks).
In Chapter 11, the debtor manages the bankruptcy estate and the objective is reorganization not liquidation. A landlord debtor-in-possession has the right under 11 USC 365 to reject an unexpired lease, but under 11 USC 365(h)(1)(A)(ii):
Xema, however, is quite right; an apartment complex is worth more as a going concern than as a vacant building. There are circumstances where the outcome might be different (if the debtor sells free and clear under 363 and the purchaser wants you out, the 7th Circuit has held 363 trumps). Of course, as a tenant, you could request the court impose conditions on a 363 sale to protect your interests. If you are one of the 20 largest unsecured creditors, your landlord is not in terrible shape; most likely, it has defaulted on its mortgage for the complex.
If you join the creditors’ committee, the Bankruptcy Code will allow you (the committee), with the Court’s approval, to hire an attorney payable out of the assets of the debtor. This lawyer will then bear the brunt of the time commitment.
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Deposits are not their assets. It’s supposed to be held but remains yours and bankruptcy shouldn’t affect it as far as I know. Maybe a lawyer can comment on that. You may have to sue to get it back if they didn’t keep the deposit held for you and used it instead.
Depends on where you are. I seem to recall that Chicago’s Landlord Tenant ordinance required landlords to hold tenant’s security deposit in something like an escrow account, and the ordinance imposes some pretty stiff penaties for landlords who don’t. In principal you’re right though–that’s the tenant’s money the landlord is supposed to be holding. Many landlords co-mingle funds, though.
As for suing them, can’t do that if they filed for bankruptcy, have to file a claim.
You have a lease until the end of April, and that’s it, right? Then you may not have a home May 1. It’s impossible to say until you know who’s going to buy the building and what they want to do with it - and even then, in my personal experience, they may lie.
While bankruptcy/foreclosure didn’t enter into it, I’ve lost two apartments now to simple sales. The first, the new owners simply decided they wanted to raise the rent far beyond reasonable (a more than $500 per month increase!) and we said no thanks.
The second, the new new new owners (the place changed hands four times in the five years we lived there) initially told us they planned to make no changes at all and would honor our existing lease and renew at the end under similar terms, and then decided to convert to condos. We were given, “as a courtesy”, first crack at buying our unit, which we declined. While the new owner was required to honor our existing lease, he wasn’t required to make it particularly pleasant for us, and three months into being the only tenants in an 18 unit building (which didn’t feel very safe) and surrounded by construction noise and dust, we approached him with an offer to sever the lease early with no penalty. He was delighted, as having us there was a pain in the ass for him.
So I’d advise getting your ducks in order and cracking open a newspaper to find a contingency plan. You might not have to move when your lease is up, but there’s no guarantee.