For the last several years, those considering filing bankruptcy in New York who lived in either a rent-controlled or rent-stabilized apartment had to consider the possibility of losing their home if they filed bankruptcy. It seemed crazy that some of the most vulnerable among us risked becoming homeless by seeking the protection and benefits allowed under the bankruptcy laws; however, this was the law until a few days ago.

In the matter of Marry Veronica Santiago-Monteverde v. John S. Pereira before the New York Court of Appeals, the question considered was “May a bankruptcy debtor’s interest in her rent-stabilized lease be exempted from her bankruptcy estate pursuant to New York State Debtor and Creditor Law section 282 (2) as a ‘local public assistance benefit?’”  On November 20, 2014, the Court answered that question by announcing, “We hold that section 282 (2) of the Debtor and Creditor law exempts a debtor-tenant’s interest in a rent-stabilized lease.”

This means that, now, those in New York don’t need to worry that they will lose their rent-stabilized or rent-controlled apartment if they file bankruptcy.  This seems like a common-sense answer; however, this decision wasn’t assured from the beginning. There were cases in the lower courts that decided that rent-stabilized apartments were not protected in bankruptcy. 

Even in this case, the lower courts decided against the debtor seeking to file bankruptcy and keep her home, and there were dissenting opinions by two of the seven justices.  It’s good to see that the majority in the Court of Appeals got it right.  This should help millions of tenants in New York sleep better tonight.