As many readers of our Cooler e-mails and blog posts are
aware, one of the hottest current topics in personal bankruptcy is the
treatment of rent–stabilized leases in Chapter 7 personal bankruptcy cases.
Earlier this month, the New York Times had an excellent front page article
entitled “Widow's
Bankruptcy Case Poses Risk to Rent-Stabilized
Tenants.” The case is captioned Santiago-Monteverede v. Pereira and
involves 79 year old Mrs. Mary Veronica Santiago-Monteverede, who has lived in
a two bedroom rent stabilized apartment in the East Village for 50 years and is
paying monthly rent of $703, while the market rate for the unit would be $2,000
to $2,500 per month.
Ms. Santiago-Monteverede filed Chapter 7 bankruptcy to
discharge $23,000 of debt, none of which was owed to her landlord. Her landlord
made an offer to purchase her lease from Chapter 7 Bankruptcy Trustee John S.
Pereira, which he accepted. The sale of
the lease was subsequently challenged by Ms. Santiago-Monteverde’s
attorneys. The U.S. Bankruptcy
Court for the Southern District of New York and the U.S. District Court for
the Southern District of New York both ruled in favor of the Bankruptcy
Trustee, and the case is now pending before the 2nd Circuit Court of Appeals, where oral
arguments were held on September 23rd.
This is the first Chapter 7 personal bankruptcy rent–stabilized
case to reach the 2nd Circuit Court of Appeals. Please keep monitoring our
Cooler e-mails and blog, and when
the 2nd Circuit Court of Appeals issues a decision and order, we will report on
it. Again, debtors who live in apartments with rent–stabilized leases need to
proceed with extreme caution in deciding whether to file for bankruptcy. Jim
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