12.6.4 Landlords in Bankruptcy

In a Chapter 13 bankruptcy, the tenant’s security deposit claim should be a priority claim.1  Generally, all priority claims must be paid in a Chapter 13 bankruptcy. A tenant should consider filing an objection to a Chapter 13 plan if it proposes to pay less than 100% of the claim for the deposit.

In a Chapter 7 bankruptcy, the tenant should argue that the security deposit is not part of the landlord’s bankruptcy estate and that the deposit belongs to the tenant.2  If the security deposit no longer exists, the tenant should file a proof of claim. This may be filed without the payment of any court costs. Although a Chapter 7 bankruptcy will discharge the debt, it is possible that a tenant’s judgment lien, if any, will survive the bankruptcy.

• 1Guarracino v. Hoffman, 246 B.R. 130 (D. Mass. 2000).
• 2In re Universal Sec. & Protection Serv., Inc., 223 B.R. 88, 93 (Bankr. E.D. La. 1998).