Due to  a quirk in the law those filing bankruptcy in New York face the real possibility of losing their rent stabilized or rent controlled apartments.  I first brought this subject up in my blog entry on May 5, 2012, which you can read for more on this subject.

After writing that entry I did contact various state legislators and have received varying amounts of interest and cooperation.  In order to protect those efforts I won’t go into more detail; however they has been interest expressed in passing legislation to protect rent stabilized and rent controlled apartments.  With that said, no action has get been taken.

Hopefully such legislation won’t be needed due to a case currently before the New York Appellate Division in the Second Department.  The case is known as  Mary Veronica Santiago-Monteverde v. John S. Pereira. 

Ms. Santiago, who lived in a rent stabilized apartment, filed a chapter 7 bankruptcy.  Her landlord, offered to buy her interest in the rent stabilized apartment and the trustee accepted the offer.  Ms. Santiago, through her attorney tried to protect her home by stating that her apartment was exempt, or protect, under Section 282(2) of the Debtor Creditor Law.  DCL 282(2) provides a list of several items that are protected if one files bankruptcy.  Although a rent stabilized or controlled apartment isn’t listed, Ms. Santiago’s attorney argued that it was similar and should be considered as protected.  Ms. Santiago lost the argument and appealed.  The case has been argued and we are waiting for a decision.  For more on Santiago see the New York Times article. 

I have several clients who are afraid to file bankruptcy due to the possibility of losing their rent stabilized or rent controlled apartment.  The decision in Santiago may even affect others filing bankruptcy outside of New York.  It just seems so unfair to take away the homes of those who are most at risk of being homeless.  Hopefully the court decides the case in favor of Ms. Santiago.  If not, hopefully legislators step up and quickly pass legislation to protect such people.