If you worry about getting an apartment after a Chapter 7 bankruptcy filing, you are not alone. Many people who file for bankruptcy relief worry about how filing bankruptcy impacts their future. The good news is that most people who file Chapter 7 can rent an apartment. However, you could face a few hurdles, but highlighting the positive impacts of bankruptcy could sway a landlord in your favor.
Filing Chapter 7 bankruptcy significantly affects your ability to pay rent. A Chapter 7 bankruptcy discharge eliminates most unsecured debts. You can get rid of debts such as:
If you meet specific requirements, you might qualify to discharge student loans.
A positive aspect of getting rid of these debts is that you have more money to pay rent payments. Your debt-to-income ratio (DTI) is much lower when you discharge your unsecured debts. Divide monthly debt payments by gross monthly income to calculate your DTI.
For example, suppose your monthly debts total $2,110 ($1,000 rent payment, $360 car payment, and $750 for the rest of your debts). Your gross monthly income is $4,000. Your DTI would equal 53%.
However, if you discharge your unsecured debts in a Chapter 7 case, your monthly debts decrease to $1,360. That means your debt-to-income decreases to 34%.
Many landlords look favorably at a lower income-to-debt ratio. A lower DTI indicates you have a greater ability to pay your debts and monthly expenses.
In addition to increasing the amount of money you have to pay rent payments by discharging unsecured debts, other factors a landlord might look at when considering you as a renter include:
A landlord needs to know that you can make your rent payments. Having steady employment is a huge factor in your favor. A letter verifying employment and income to attach to the rental agreement could be helpful.
Landlords often check credit scores when reviewing a rental application for getting an apartment. Negative items on a credit report decrease your credit score, including judgments, late payments, repossessions, over-the-limit balances, and collection actions. If it appears you continue to struggle with debt problems, it could make getting an apartment more challenging.
However, a Chapter 7 bankruptcy filing discharges the unsecured debts on your credit report. Rebuilding your credit score after bankruptcy improves your chances of renting the apartment you want.
If you have a good rental history with other landlords, use that to your advantage. Ask your prior landlord for a reference letter. At the very least, your prior landlord should be able to confirm that you made your rental payments on time and did not damage the property.
Large corporations often set parameters that their local managers must follow. For example, an apartment complex may have policies that deny renters who have a bankruptcy, repossession, or judgment on their credit history. There might not be any acknowledgment of the positive aspects of your finances and rental history.
Therefore, you might consider renting from a private property owner. A private owner may be more willing to consider your current situation and the benefits of filing a Chapter 7 bankruptcy case.
Other ways you can improve your chance of renting an apartment after Chapter 7 include:
Filing Chapter 7 should not impact renewing a rental or lease agreement. Provided you pay your rent on time and do not violate your lease terms, your landlord should not have any legal reason to deny your rental agreement.
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