Losing Security Deposits when a Landlord Files Bankruptcy

On Behalf of | Jul 29, 2016 | Bankruptcy Law |

Issues can arise when your landlord files bankruptcy such as what happened when a Northeast Philadelphia owner of multiple properties filed bankruptcy. http://www.philadelinquency.com/2015/12/31/what-do-you-do-when-your-landlord-is-bankrupt/  Generally, if the landlord filed a chapter 7 bankruptcy and is no longer going to operate the apartment building and you move, there may be an issue relating to getting your security deposit back. The landlord should have put the money in a separate account which would protect your money from the landlord’s other creditors. However, all too often, the money is not segregated.  In that event, it is less likely that you will get your deposit back. However, all is not lost. A deposit creditor is given a higher priority then general unsecured creditors so even if the landlord does not have enough assets to result in full payment to creditors, the tenant is ahead of a lot of creditors with any distribution. Of course if there are no funds, then the deposit is lost. 


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