Everyone knows that, if you’re a homeowner, you might have to sell your house and flat if you become bankrupt. But what happens if you’re living in a rented property? This article from Bankruptcy Clinic explains what could happen to your tenancy if you’re declaring bankruptcy and your landlord is one of your creditors. We’ll also consider the potential implications of bankruptcy if you’re up to date with your rent.
Your landlord as creditor
If you’re behind with your rent, the arrears will constitute a debt that you’ll need to include on your bankruptcy petition and discuss with the Official Receiver. Depending on your circumstances, you may be able to repay your arrears after your Bankruptcy Order has been made and therefore keep living in the property.
However, this may not be possible if the Official Receiver requires you to set up an Income Payments Agreement or Order, as this will prohibit you from making any direct payments to your creditors – including your landlord. If this happens, you could be evicted unless you can find some other way of clearing your arrears, such as borrowing the money from a relative or friend.
Unfortunately, even if you’re willing and able to repay the arrears, you could still find yourself evicted. This is because some tenancy agreements contain a clause stating that the property cannot be let to an undischarged bankrupt. This could be the case whether you’re living in private rented accommodation, or are renting from a local authority or housing association.
If you’re up to date with your rent
In most cases, the Official Receiver will tell your landlord about your bankruptcy, even if they’re not one of you creditors. This could cause problems if there’s a bankruptcy clause in your tenancy agreement (see above), although there may be ways to get around this.
Firstly, if you’re genuinely worried that your landlord may invoke this clause and you’ll end up homeless, you can apply to the court not to disclose your bankruptcy to them. They may or may not agree, but it’s always worth asking.
Secondly, if your landlord does find out about your bankruptcy, they won’t necessarily evict you as a matter of course. After all, if you’re up to date with your rent and haven’t had any payment problems in the past, why would they want to get rid of you? Replacing tenants (not to mention finding reliable ones) costs time and money and they could decide that they’re better off letting you stay.
There’s also the fact that, now your Bankruptcy Order is in place, your finances are likely to be more stable rather than less – not least because the Official Receiver will have factored your rent payments into your essential monthly outgoings. So there’s no reason for your landlord to conclude that you’ll be unlikely or unable to keep paying your rent.
Moving house whilst bankrupt
Whether you’ve been evicted or simply want to move elsewhere, you could find it hard to get a new tenancy agreement once you’ve been made bankrupt. As we’ve already seen, many landlords won’t let their properties to undischarged bankrupts and for new tenancies, they may insist on a minimum period of time having elapsed after your discharge.
These days, many landlords carry out thorough checks on potential tenants, which could include looking at your credit record and searching the Insolvency Service Register. So there’s no point in simply keeping your bankruptcy quiet. Your best bet is to be upfront about it and accept any restrictions levied on you, such as paying a larger deposit than normal or having to put a guarantor in place.
Of course, you’ll be in a much stronger position when applying for a new tenancy if you had a good payment record at your previous property, and can produce a good reference from your landlord or letting agency. A positive reference from your employer will also help.