If you find yourself in a tight financial situation, friends and family may encourage you to file chapter 7 bankruptcy. This type of bankruptcy is an attractive option because it eliminates all your debt at once without a repayment plan. It offers a clean slate in some respects, but also appears on your credit report for many years. So, it’s important to understand how bankruptcy will affect all aspects of your life. One of the most important variables is where you – and any dependents you may have – will live from this point forward. If you currently get a federal subsidy to pay rent, how will bankruptcy affect your eligibility for Section 8 housing vouchers? A reader wrote in recently who is in this situation:
Reader question: Does filing chapter 7 bankruptcy always end eligibility for section 8 rental subsidy?
Answer: Not immediately. But individual landlords may legally refuse to rent to you in the future if they see a bankruptcy on your tenant application.
Bankruptcy filing does NOT officially affect eligibility for Section 8 subsidies. (The government now calls this the Housing Choice voucher program.) Likewise, receiving housing vouchers does not affect bankruptcy proceedings. That said, there can be negative future consequences of filing for chapter 7 bankruptcy.
Legally, Section 8 Landlords Can Reject Any Tenant Application
A previous bankruptcy can reduce your choice of housing as a Section 8 renter. This is because landlords who participate in the subsidy program can use any legal, non-discriminatory standard for screening tenant applications. Of course, this screening includes looking at a potential tenant’s credit report. Bankruptcies appear on your credit reports for 7-10 years after you file.
IMPORTANT: It is legal for a landlord to reject a potential tenant’s housing application due to poor credit history. It does not matter if the tenant has a Housing Choice (Section 8) voucher or not.
What Happens After I File Bankruptcy?
If you’re renting from a Section 8 landlord, the bankruptcy court will notify them and your creditors when you file. Since a Section 8 housing voucher helps pay for rent, the bankruptcy court counts it as a type of income. From there, it is up to the landlord to choose whether or not to keep renting to you. Your bankruptcy filing shouldn’t affect your eligibility for Section 8 vouchers themselves. However, bankruptcy filings could affect future Section 8 approvals in certain circumstances or jurisdictions.
Having a chapter 7 filing on your credit report makes you less desirable to future landlords. This is because you haven’t paid any money towards your past-due debts. Under this kind of bankruptcy filing, there is no structured repayment plan. Chapter 13 is a different kind of bankruptcy filing that results in some creditors receiving payments under an approved repayment plan. Regardless of which form of bankruptcy you choose to pursue, you’re not alone. Over 400,000 Americans declared bankruptcy in 2021.
Can Section 8 Housing Evict Tenants Who Declare Bankruptcy?
Bankruptcy does not automatically evict you from your current home. According to the experts, however, getting an apartment or house after bankruptcy can be more difficult. This is especially true for people with negative credit and bankruptcy histories.
At the end of the day, it’s pretty much up to the landlords and individual cities/states when it comes to rules around housing subsidies and bankruptcies. For example, the Baltimore HCVP manual shows that bankruptcies can result in denial of further assistance under “22.214.171.124 Bankruptcy and Mortgage Affirmation.” If you’re a landlord, you may find trying to evict a Section 8 tenant much harder once they declare bankruptcy.
Legal Help is Available to You
Federal law prevents bankruptcy judges and courthouse employees from giving legal advice or helping with your paperwork. For this reason, it’s a good idea to find the right bankruptcy attorney to help you.
A lawyer can provide a bankruptcy timeline that applies your unique situation. answer questions you may have about your specific housing subsidy. A lawyer can also help you find an approved agency where you can complete required training courses.
If you choose to file on your own, then you can download the forms from uscourts.gov.
Laura Schaefer is the author of The Teashop Girls, The Secret Ingredient, and Littler Women: A Modern Retelling. She is also an active co-author or ghostwriter of several nonfiction books on personal and business development. Laura currently lives in Windermere, Florida with her husband and daughter and works with clients all over the world. Visit her online at lauraschaeferwriter.com and linkedin.com.