Corash & Hollender, P.C.

New York's rent-stabilized apartments exempted from bankruptcy

Not every asset that a person has can be touched during bankruptcy proceedings. For example, public assistance benefits like disability or unemployment benefits are not subject to seizure. In a recent decision, the New York State Court of Appeals, the state’s top court, ruled that rent-stabilized apartments also fall into this category.

The case centered on an 80-year-old Manhattan woman who lives in a rent-stabilized apartment. She had around $23,000 in debts and was going through bankruptcy when her landlord made an offer to her trustee. The landlord would buy out the woman’s lease for the amount of her debts, and allow her to continue to live in the apartment, where she has lived for more than 50 years.

According to The New York Times, the trustee accepted the offer, but the woman’s attorney contested it, fearing that she might be evicted someday without a lease to protect her.

The courts sided with the trustee until the question of whether a rent-stabilized apartment lease is exempt from bankruptcy. The judges ruled that it was. The court’s decision noted that affordable housing is “an essential need,” and that the rent stabilization program has played a critical role in helping many New Yorkers find and keep decent housing for themselves.

This ruling has major implications beyond allowing this woman to keep her home. Many low-income residents followed this case with interest, as did the state attorney general’s office and other officials. Had the Court of Appeals ruled differently, it could mean that people who struggle to afford a home could lose their rent-stabilized housing if debt ever forces them into bankruptcy.

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