How Could Bankruptcy Affect Your Apartment Rental Agreement?

Did you know that nearly 23-24% of renters in Alabama are considered severely cost-burdened, spending over half their monthly income just to keep a roof over their heads? When even a single paycheck disappears or an unexpected bill hits, the prospect of eviction suddenly becomes real. For many South Alabama residents, bankruptcy offers a way to regain control—but it also brings up urgent questions about what happens to your apartment lease. Will your landlord be forced to let you stay, or could bankruptcy actually make things more complicated? 

If you’re facing tough choices about debt and housing, don’t wait—call Hollinger Connor, LLC today for answers.

Bankruptcy Effect #1: The Automatic Stay Temporarily Stops Eviction

The moment you file for bankruptcy, the automatic stay goes into effect. This is a federal court order that stops most creditors—including your landlord—from taking action to collect debts. In practical terms, if you’re behind on rent and your landlord is threatening to evict, the automatic stay temporarily halts any new or ongoing eviction proceedings.

• If your landlord has NOT yet obtained a court-ordered eviction judgment: The automatic stay usually prevents them from starting or continuing eviction for rent owed before you filed.
• If your landlord ALREADY has a judgment for possession (a final eviction order): The automatic stay may not protect you, or may only offer a very short pause. In Alabama, if the landlord gets this order before you file, you could be required to leave the apartment soon after filing.

The automatic stay gives you a valuable window to consult a bankruptcy attorney, review your options, and decide your next move—before the sheriff comes knocking.

Bankruptcy Effect #2: You Must Choose to Assume or Reject the Lease

Once you file, your apartment lease becomes what the law calls an “executory contract.” This means you, the tenant, and your landlord both still have ongoing obligations under the agreement. As a debtor in bankruptcy, you must decide—sometimes quickly—whether to “assume” (keep) the lease or “reject” (let it go).

• Assuming the Lease: If you want to stay in your apartment, you must commit to making up all past-due rent and continuing to pay rent going forward. The court (and your landlord) may require proof that you can meet these obligations before approving your decision to assume the lease.
• Rejecting the Lease: If you cannot afford to catch up or keep paying, you may choose to reject the lease. This allows you to walk away from the contract, and any unpaid rent up to the date of filing is treated as unsecured debt—meaning it may be wiped out in a Chapter 7 or included in a Chapter 13 repayment plan.

A top-rated bankruptcy lawyer can help you weigh this decision, negotiate with your landlord, and maximize your chances of keeping your home if that’s your goal.

Bankruptcy Effect #3: You Remain Responsible for Future Rent

Bankruptcy can give you a second chance by wiping out or restructuring past debts, but it does not excuse you from paying rent that comes due after you file. If you continue living in your apartment post-filing, you are legally responsible for staying current on all new rent. 

Missing rent after filing is grounds for your landlord to request “relief from stay” from the bankruptcy court. This means the landlord asks the court for permission to proceed with eviction, arguing that you’re not meeting your ongoing obligations. 

If you assume the lease but fall behind again, the protection of bankruptcy is much weaker, and the court is likely to side with the landlord. If you know you cannot afford future rent even with bankruptcy, it may be wiser to reject the lease and look for housing that fits your new financial reality. 

Bankruptcy Effect #4: Eviction May Still Be Possible—But the Process Slows Down

Bankruptcy does not make you eviction-proof. If you violate your lease after filing, your landlord can petition the bankruptcy court to lift the stay. The court will almost always grant this if you are not paying post-petition rent or if there’s evidence of illegal activity or damage.

Even with the automatic stay, Alabama law allows landlords to evict tenants if there’s a valid, ongoing reason outside of the bankruptcy process (such as criminal activity). However, bankruptcy delays the timeline, which can give you extra time to find other housing or catch up on payments.

Bankruptcy Effect #5: Impact on Security Deposits and Lease Renewals

If you move out or reject the lease, your landlord can use your security deposit to cover unpaid rent or damages, even if you’ve filed for bankruptcy. Any amount owed beyond the deposit may be treated as an unsecured claim.

Landlords in Alabama are not required to renew leases for tenants who have filed bankruptcy. While bankruptcy cannot be used to discriminate unlawfully, some landlords may be reluctant to offer a renewal after a bankruptcy filing, especially if there was a prior default or late payment history. 

Being transparent, providing references, and showing stable post-bankruptcy income can sometimes help you secure a renewal or new lease elsewhere.

Bankruptcy Effect #6: Challenges Renting in the Future

A bankruptcy filing stays on your credit report for up to ten years, and many landlords check credit before approving new tenants. While some larger apartment complexes may have strict rules, many individual landlords in Alabama are more flexible, especially if you can demonstrate a recent history of on-time payments and responsible behavior post-bankruptcy.

If you’re concerned about renting after bankruptcy:

• Offer a larger security deposit if possible.
• Provide letters of recommendation from previous landlords.
• Show documentation of your current income and employment.
• Explain your situation honestly—many property owners appreciate transparency.