Are rent arrears included in bankruptcy
- 15 Dec 2021
Rent arrears are an unsecured debt. They will be included and written off if you go bankrupt. This may have implications depending on whether you are still resident in the property and who your landlord is.
Included in this article:
- Are rent arrears written off if you go bankrupt?
- What if you owe rent to your current landlord?
- Rent arrears on business premises
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Are rent arrears written off if you go bankrupt?
All rent arrears you owe is included if you go bankrupt. It is written off with the rest of your unsecured debt.
You may have moved out of the property but still owe money to the old landlord. They are treated just the same as any of your other creditors (loans, credit cards or store finance). Given their debt is unsecured (it almost always is), they do not get preferential treatment over anyone else you owe money to.
The ongoing rent you pay to your current landlord is not included (given you want to stay in the property). You should continue to pay it as normal. You must include a sufficient amount to cover this in your living expenses budget.
It is unlikely your current landlord will find out if you go bankrupt as long as you do not owe them money.
What if you owe rent to your current landlord?
If you rent from a private landlord, they may well be unhappy if you go bankrupt and as a result they have to write off the rent arrears you owe them. They might ask you to leave the property because they do not want to risk you getting into arrears again.
Where the amount you owe to your landlord is relatively small, you might be able to avoid this risk by leaving them out. Technically they have to be included. However, if you don’t list them as a creditor on your application, the Official Receiver (OR) will not automatically be aware of the debt. As such your landlord will not be contacted about it.
The issue with this however, is how you will repay the arrears you owe. The OR is likely to identify any significant repayment you include in your living expenses budget. It is not normally possible to maintain any repayment plan with your landlord unless the amount agreed is relatively small.
Social landlords such as the local council or a housing association will usually accept that any rent arrears you owe must be written off once you go bankrupt. It is unlikely they will evict you as long as from now on, you maintain your normal rent payments on time.
Rent arrears with your current landlord? Don’t go bankrupt without getting advice from us first. Call 0800 044 3194) or complete the form below.
Rent arrears on business premises?
Rent arrears owed on any business premises is written off if you go bankrupt as long as the lease is in your name. In addition, you are no longer liable for any future rent you owe as part of an ongoing lease.
If you want to stay in your current premises, you will need to speak to the landlord in advance. As soon as you go bankrupt, they will be contacted and your current lease terminated. You will then need to agree a new lease with them going forward.
Where you want to leave the premises, but are currently trapped with a long, expensive lease you can no longer afford, bankruptcy gives you a way out.
You can make arrangements to move into alternative accommodation before going bankrupt. Once you are bankrupt, any debt associated with the old lease is written off.
You business landlord will find out if you go bankrupt. If you want to stay in their property, you will need to speak to them and negotiate this with them up front.