Your Guide to Getting an Apartment After Bankruptcy

If you’re in the process of getting an apartment after bankruptcy, you’re likely to encounter some blockers. Filing for bankruptcy provides the opportunity for a fresh financial start, but your decision also impacts your credit score for seven to ten years. This makes securing assets more challenging, and getting approved for an apartment can be a greater feat.

How does bankruptcy affect renting?

Bankruptcy can have significant effects on renting, both for potential renters and landlords.

Here are some key ways in which bankruptcy can impact the rental process:

1. Renter’s credit history: Filing for bankruptcy will have a negative impact on a renter’s credit history. This can make it more challenging for individuals to pass the credit check that landlords typically conduct during the application process. Landlords often use credit scores as an indicator of a renter’s financial responsibility and ability to pay rent on time.
2. Rental application approval: Some landlords may be hesitant to rent to individuals who have a bankruptcy on their record. They may view it as a higher risk since the renter’s financial situation has been unstable in the recent past. This can lead to rejections or higher security deposits.
3. Security deposits: If a renter with a bankruptcy is approved for a rental, the landlord may require a higher security deposit as a way to mitigate the perceived risk. A larger security deposit provides the landlord with a financial buffer in case of unpaid rent or damages.
4. Rental terms: In some cases, renters with a bankruptcy may be required to agree to different rental terms or conditions. This could include shorter lease durations or stricter late payment policies.
5. Co-signers or guarantors: Renters with a bankruptcy may need a co-signer or guarantor with a stronger financial standing to vouch for their ability to meet rental obligations. This co-signer will be responsible for the rent if the primary renter defaults.
6. Bankruptcy disclosure: Renters may be required to disclose their bankruptcy status during the application process. Failing to do so could lead to lease termination if the landlord later discovers the bankruptcy.

Why is bankruptcy a cause for concern for landlords?

Bankruptcy can be a cause for concern for landlords due to several reasons:

1. Financial instability: Bankruptcy indicates that the individual has faced significant financial difficulties in the past. This can raise concerns for landlords about the renter’s ability to consistently meet their monthly rent obligations in the future. Landlords rely on rental income to cover their own expenses, and they want tenants who are financially stable and reliable in paying rent on time.
2. Risk of non-payment: Landlords may worry that a renter with a bankruptcy history could be more likely to default on rent payments. The bankruptcy filing suggests that the renter has experienced financial challenges and may not have the same level of financial security as other applicants.
3. Damaged credit history: Bankruptcy has a negative impact on a renter’s credit history. A lower credit score can signal a higher risk of non-payment or difficulties in managing financial responsibilities. Landlords often use credit scores as a screening tool to assess an applicant’s financial reliability.
4. Liability concerns: Landlords may be concerned that renters who have gone through bankruptcy may not prioritize the property’s maintenance or care. The fear is that individuals struggling with their own financial situation might neglect the rental property, leading to potential damages or increased repair costs.
5. Lease termination risk: Some landlords worry that a tenant with a recent bankruptcy might not fulfill the entire lease term. If a renter’s financial situation worsens, they may be forced to break the lease, leaving the landlord with the task of finding a new tenant and potential income loss during the vacancy period.
6. Higher security deposit: To offset the perceived risk associated with a renter who has filed for bankruptcy, landlords may request a higher security deposit. While this provides some protection, it may also make the rental less appealing to prospective tenants, leading to longer vacancies.

Steps you can take to make getting an apartment after bankruptcy easier

Bankruptcy does not define you or your value as a renter. If you file for bankruptcy, it’s important to remember you’re not alone. In the 2020 financial year, nearly 660,000 Americans filed for non-business bankruptcy. It’s also important to remember that life goes on after bankruptcy. If you’re moving from an existing rental or you decide to sell your home and rent to save money, you can still secure an apartment after becoming bankrupt by showing your stability. Here are some steps you should take when applying for an apartment after bankruptcy:

1. Be honest about your bankruptcy status

Honestly is the best policy, especially when getting an apartment after bankruptcy. Your bankruptcy status will become apparent once an apartment owner runs your credit check, so it pays to be honest from the start. Be open about your bankruptcy filing and proactive about showing it doesn’t define you. This is a much better approach than hoping the apartment owner doesn’t find out about your filing.

The importance of your case status

Property owners are reluctant to rent to people with pending bankruptcy cases. You can certainly apply for rentals at this time, but you should understand that many apartment owners will only approve applications once your new debt obligations get settled in court. Some apartment owners insist all bankruptcy cases get settled first. Others are more lenient and only make these rules for Chapter 13 cases. If you have filed for Chapter 7 bankruptcy, you may convince a property owner to consider your application. Simply explain you’re liable for the rent as you accumulated this debt after filing for bankruptcy.

2. Emphasize your available income

When trying to get an apartment after bankruptcy, you should focus on the positives. People who file for bankruptcy usually have much better cash flow as their income isn’t eaten up by debt repayments. Emphasizing your available income to an apartment owner can help you overcome your poor credit score. Stress how much money you have available after paying your bills and how that can easily cover your rent each month. Individual property owners are often more open to listening to the personal circumstances of rental applicants than rental agents.

3. Get personal about your past

If you are renting from an individual property owner, you can also have a discussion that goes beyond the dollars and cents. Often, people become bankrupt due to difficult circumstances beyond their control such as illness, divorce, or job loss. Explain why you became bankrupt and, perhaps most importantly, why it’s unlikely to happen again. Stress that you’re very interested in the apartment and committed to paying your rent in full and on time every month. You can try this approach with rental agents too, although they tend to have stricter renting rules and less flexibility.

4. Show your rental history

If you made rent regularly in the past, despite the financial troubles that led to your bankruptcy, this can work in your favor. Submit rental receipts for the last few years that show your commitment to paying rent in full when it’s due with your rental application. If you made rent when times were tough, chances are you’ll do the same now you’re not drowning in debt. If you can secure references from past property owners, they can be a great support to your rental applications.

5. Job stability matters

An apartment owner wants to know you have a reliable income, so a stable job can really count in your favor. Providing details about your employment can put their mind at ease. In your rental application note down how long you’ve been with your current employer, whether you have a permanent position, and your current wage or salary. The longer you’ve been with your current employer, the better.

You may also like to share your employment history. This can be a great tactic to show you’re regularly employed, with few if any employment gaps. It can be especially persuasive if you’ve only recently secured your current position.

6. Consider your entire credit report

Bankruptcy is just one black mark on your credit report. An apartment owner will assess your entire credit report to create a complete picture of your financial choices and character. They’ll look for evictions, repossessions, late payments, and lawsuits filed against you. If you don’t have any of these other issues, you’re more likely to secure an apartment than someone who does.

7. Present your financial records

When getting an apartment after bankruptcy, your financial records should be an open book. An apartment owner wants to know you can handle your finances better now than you could in the period around your bankruptcy. Your financial records can show this. Presenting bank or credit card statements for the period around your bankruptcy and today can show your improved money management skills. These records can also show you have more disposable income and fewer debt obligations than you once did.

8. Negotiate for a shorter lease

Some apartment owners are reluctant to get into long-term arrangements with prospective tenants who’ve filed for bankruptcy. However, they may be willing to rent to you on a short-term lease. Suggest this option, stressing that you’re both free to part ways without fuss if it doesn’t work out. A short-term lease gives you time to build the apartment owner’s trust. Even if they decide they don’t want to extend your lease, you’ll have a better credit score and an easier time securing a new apartment than you did before.

9. Be optimistic

It’s easy to get discouraged during the property search, especially if your bankruptcy is new. However, it gets better. Most people can find a rental property around three months after a bankruptcy discharge. Some property owners are reluctant to rent to people who filed for bankruptcy within the last two years. As time passes, your bankruptcy status becomes less important. As you continue making smart financial choices, your credit score will improve and property owners will understand that your bankruptcy is a part of your past. Hang in there and a suitable apartment will come your way soon enough.

Final thoughts

Getting an apartment after bankruptcy is a little more challenging, but it’s certainly possible. Showing you are in a more stable financial position than you once were can encourage property owners to overlook your credit score and take a chance on you.

Remember, every rental situation is unique, and landlords have different criteria. Demonstrating your financial responsibility and commitment to rebuilding after bankruptcy can significantly increase your chances of finding a suitable rental property.

Frequently asked questions