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Rent-controlled units may become bankruptcy assets

Rent control for tenants in major cities is a critical program that provides financial relief for those who need it most. Impoverished populations throughout Washington, D.C., and other municipalities benefit from housing provisions, which can prevent underprivileged renters from plummeting into personal bankruptcy. Similar to Section 8 and other housing programs, rent-controlled apartments in major cities such as New York City provide disadvantaged residents with the protection they need to live quality lives. This program is now being threatened, however, by unscrupulous agencies who contend that a rent-stabilized lease can be considered an asset, similar to a home or vehicle. These changes could have wide-reaching effects for renters throughout the region, as they begin to worry about the future of their bankruptcy claims.

The case that has prompted the uproar revolves around a 79-year-old New York woman who has lived in the same apartment for decades. As a low-income tenant, she filed for bankruptcy after her husband died and she fell behind on her payments. The trustee for the woman's bankruptcy determined that her rent-controlled lease was an asset; now, the woman could be ousted from her rent-stabilized apartment, or she could even be prevented from handing it down to her son. Federal district courts have confirmed the ruling.

News reports show that the vast majority of rental housing in Washington, D.C., is categorized as rent-controlled, with a few exceptions. From June 2012 to June 2013, about 750 D.C. residents sought protection for personal bankruptcy. If the precedent from the New York case is used to decide bankruptcy issues in the D.C. metro area, scores of residents could be forced to sacrifice their rent control.

Experts in the field worry that the New York ruling will encourage landlords to evict tenants with rent-controlled leases who file for bankruptcy. These individuals deserve protection even though they rent their homes, and they should not be forced from their abodes simply because they declared bankruptcy. Dwellers in rent-controlled apartments who are seeking bankruptcy protection may consult qualified bankruptcy attorneys to learn more about the effect this recent ruling could have on the local bankruptcy court.

Source: www.washingtoncitypaper.com, "New York bankruptcy case could undercut D.C. rent control" Aaron Wiener, Oct. 21, 2013

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