No Free Lunch, But Free Rent? Public Assistance Recipient’s Past Due Rent Discharged in Bankruptcy

February 1, 2014

In re Kia Janet Aikens, a case involving a public housing resident, truly epitomizes the fresh start principle on which bankruptcy is based.  Why?  The debtor was allowed to discharge her past due rent payments to the New York City Housing Authority, and even after a judgment for possession was entered, she was allowed to remain in her unit as long as she made her future rent payments.  It sounds too good to be true.  Well, it is true and I will explain why.

 

While the bankruptcy process is established by federal law, many of your rights, such as ownership interests or property rights, are determined by state law.  Just because you file bankruptcy does not mean that you lose certain rights that you would otherwise have under state law.  Now, public housing is funded by the US Department of Housing and Urban Development and administered on the local level.  But I mention the rights under state law merely for background information, because had the court applied state law in this case (which Judge Robert Gerber of the Southern District discusses in his decision), the debtor would have had to pay past rent.  What distinguishes this case from most landlord-tenant eviction proceedings is the fact that the “landlord” is not a private property owner but rather the New York City Housing Authority (i.e. a government agency).  As a resident of public housing, then you are a recipient of a government benefit.  Judge Gerber upheld the provision that government benefits cannot be denied simply because a debtor discharged prepetition debt by granting the debtor’s motion to determine that the exception to the automatic stay provisions (the sections that would require the debtor to pay back rent to remain in her unit) were inapplicable.

 

Essentially, the debtor discharged her past due rent and stopped the eviction process through bankruptcy.  Bankruptcy was designed for this purpose – not free rent but to help those of us who most need it by allowing us to start fresh and move forward.

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