Bankruptcies have been increasing for the last few years. They are 16.2% higher than a year ago. The number of bankruptcy filings to date is 486,613 compared to 418,724 a year ago. However, the number of bankruptcy filings today is nowhere near the rate of 2010, when there were about 1.6 million. The most common reasons for filing for bankruptcy are loss of job, medical bills, or poor debt management skills. A bankruptcy filing can lead to increased difficulty in obtaining a good credit score, additional credit, a job, insurance, and even a rental apartment. After a job, the most important thing is having reliable and safe housing. Here are some tips on how to rent an apartment after bankruptcy.
Filing for bankruptcy can be a fresh start. It is an opportunity to leave behind late payments because the burden of debt has been lifted. A bankruptcy filing allows credit card and loan debt to be discharged. Your financial obligations have been substantially reduced. Hence, if your lease is up or you wish to continue your new start by finding cheaper rent, here are some tips to help you with the rental application process. It starts with honesty, a good rental history, a security deposit, and choosing between property management companies or private property owners. Let’s dive in.
Be Honest
When approaching potential landlords, honesty is the best policy. Most will do a credit check and will see the bankruptcy filing on your credit report. The bankruptcy case will sit in your credit history for seven to ten years. Therefore, you have nothing to gain by lying. It is best that you offset the negative with the positive.
If you have a good employment history and on-time rent payments to your previous landlords, this is what you should lead with. The property owner should be made to understand that your current financial situation is much better since you filed for bankruptcy. You now have fewer financial obligations, preventing you from paying your rent on time each month. Your financial crisis is now in your past.
Present Your Rental History
Your rental payment history will be good if you follow these four basic principles: Food, Shelter, Utilities, and Transportation. If you have financial difficulties, this is a great practice. It is best to pay these bills first, instead of credit cards and loans. Your budget should first prioritize food and shelter, then utilities, and finally, bus or train fare, gas, and car expenses.
Hence, you will always have a good rental history to present to any prospective landlord. Besides, credit card companies cannot evict you from your home. They can only close your credit card accounts and report the delinquency to the credit bureaus. Therefore, you will always be looked upon as a good tenant when looking for a new place to rent. Especially when it is tied to the length of time you have had your last rental property.
Offer A Larger Security Deposit
After being honest and presenting your rental history, if your future landlord is still hesitant, you can offer a larger security deposit. After your debt has been settled, you may have more disposable income, which will allow you to increase the deposit for your new apartment. However, the request for a larger deposit is governed by the state where you live. Many states set a maximum of one to two months’ rent.
Check the laws of your state for clarification. Some states do not regulate the amount of the security deposit. Therefore, this could be an option when negotiating the terms of your new lease. The lease agreement is the main document that dictates the terms of the tenancy. This includes the security deposit amount.
Property Management Company vs. Private Property Owners
There are two types of entities you can rent an apartment from. There are property management companies or private property owners. They each have different approaches to renting to a prospective tenant. One has specific credit requirements, while the other may be relaxed on credit score criteria. They both will require proof of income, length of employment, and rental history.
Property Management Company
Management companies tend to focus on credit scores, length of employment, and proof of income when considering leasing an apartment. In New York, the standard was a month’s rent and security when renting an apartment. When we relocated to the south, we needed to rent an apartment while our new home was being built. With our credit score, employment history, and income, we were able to rent our apartment with one month’s rent with apartment insurance. The cost of the apartment insurance was about $20 per month. I had never heard of this and was pleasantly surprised by the low entry cost to renting an apartment in South Carolina. This was our only experience with renting in South Carolina.
Private Property Owners
Private Property Owners are typically not credit-check apartments and are not managed by a property management company. The private property owner manages the entire rental process from advertising to collecting the rent. Private landlords are often more flexible on lease terms and rental pricing. They are more concerned with your income, your prior rental history, and how you present yourself. Private property owners want to know the person they are renting to. Having a list of references could help your case.
They may see bankruptcy relief as a way to free up more of your disposable income. They also understand that you cannot file for bankruptcy again for a while if it was a recent bankruptcy filing. Since private property owners are more flexible with rental costs, this may be the best way to rent if you do not have much money for a large security deposit.
Each landlord will have their own set of rules for determining who qualifies to rent their private property. However, it should be primarily based on income, ability to pay, and past rental history without any bias. To give them more clarity about your situation, you may want to share the life event or events that led you to file for bankruptcy. This is your opportunity to tell your story.
Bankruptcy Process
If you are exploring options before filing for bankruptcy, please consult an experienced bankruptcy attorney. Most offer a free consultation, where they will provide legal advice, explain the bankruptcy court process, and review your outstanding debts. They will fully understand the bankruptcy code for your state.
They can explain the automatic stay process that stops all collection efforts. A bankruptcy lawyer will explain how a bankruptcy discharge can or cannot help you. That is why this is a necessary step if you are considering starting a bankruptcy process. They will advise you that, depending on the type of bankruptcy, it will negatively impact your credit report for seven to ten years. You will need to provide your contact information, bank statements, pay stubs, monthly expenses, assets, and outstanding debts. The good news is that filing for bankruptcy can be the best option when all else fails.
However, you should consider a debt relief agency as well. They are usually nonprofit organizations that advise and educate you on managing money and debt. They may be able to help you formulate a budget or help you contact your creditors for relief. However, there are also debt settlement agencies, debt consolidation lenders, and credit repair companies that can help. According to the Consumer Financial Protection Bureau (CFPB), debt settlement companies, debt consolidation lenders, and credit repair companies are typically for-profit companies that promise to fix your credit and debts and charge you money for taking actions you can do yourself for free. These are options to consider before you begin the process of filing for bankruptcy.
Recap: Tips on How To Rent An Apartment After Bankruptcy
Filing for bankruptcy is a financial tool designed to help those burdened with debt. However, it should not prevent you from moving on with your life. It should not hinder you from finding a job, getting insurance, or renting a new apartment. You can also consider debt relief agencies, debt settlement companies, debt consolidation lenders, and credit repair companies. Consider the nonprofit organizations only. There is no need to spend additional money if you can get these services at little to no cost. Read Is a 671 credit score good or bad? How to improve it? for tips to raise your credit score within 90 days.
The first thing to do is to search for an apartment from a managed property and/or a private owner. Casting the net wide will enable you to obtain a rental agreement best suited to your current financial situation. Be honest by sharing your bankruptcy filing. You should be prepared to provide proof of rental and payment history. Research your local rental laws regarding flexibility with the deposit. If possible, offer to pay a higher deposit to secure the apartment you want. Understand the difference between management property expectations and private property with an individual landlord. Poor credit should not hinder you from obtaining a new life with a new apartment.
Helpful Tips For Finding An Apartment After Bankruptcy:
- Create a budget
- Know your ability to pay your rent – 30% of your gross monthly income
- Save for your first month’s rent and deposit
- Save for moving expenses
- Have all necessary documents: contact information, pay stubs, proof of prior rentals, and proof of on-time payments
- Consider apartment complexes and private properties. Cast a wide net for the best outcome.
- Opt for a long-term lease to lock in the rental rate and to avoid additional increases to the rent and the deposit
I pray you have the best luck finding a new apartment that fits your financial needs.
This post is for informational purposes only. Please consult a financial advisor and an experienced bankruptcy lawyer for legal advice. They are the best option to determine the best course of action for your financial needs.
Additional Reading…
Credit Card Debt Forgiveness For Seniors
How To Manage Credit Card Debt