Legal Question in Real Estate Law in California

I am currently a tenant renting a house form a landlord who recently filed for Bankruptcy. She currently has approx. $4K in security deposit of ours under the lease agreement. I have several questions:

1) Are we treated as any other creditor since she has filed for bankruptcy (if so, what is the priority to pay us back upon leaving the house?);

2) Should we continue to pay our rent to her if there is a risk we will not see our security deposit (which is equivalent to 1.3 months rent);

3) Are we at risk of eviction if we choose not to pay her our rent equivalent to the sec deposit (~1.3 months);

4) If we do pay, should we consider paying to the bank directly or an 3rd party escrow account ?;

5) Does our lease "survive" bankruptcy proceedings (dates/Terms, deposit paid, etc.)?

Thanks,

Chris


Asked on 7/12/10, 1:19 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

I don't know if I can answer all of your questions. There is surprisingly little case law on this subject. In general, your business relationship with the landlord will fall under the jurisdiction of the bankruptcy court, and the lease or rental agreement itself can be confirmed or set aside. Your security deposit is not due to be refunded until the lease is set aside by the court or runs out under its terms. Rental payments should be made as usual until the BK court orders otherwise. You should file a claim in the bankruptcy proceeding to place the court and trustee on notice of the deposit. There is a provision in bankruptcy law at 11 USC 507(a)(6) making part of your deposit a priority (in 1996, $900). There is one case that sheds some light on the situation: In re Barakat (1996) 99 F.3d 1520.

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Answered on 7/13/10, 9:24 am


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