Bankruptcy for Tenants: Anti-Discrimination Protection for Tenants in Public and Subsidized Housing

In this article, we'll learn about a law called Section 525(a) of the Bankruptcy Code. This law makes sure that when people go through bankruptcy or get their debts forgiven, government agencies like Public Housing Authorities (PHAs) can't treat them unfairly. We'll see how this law affects tenants in Illinois and what it means for the Housing Choice Voucher (HCV) Program.

What is Section 525(a) of the Bankruptcy Code?

Public Housing Authorities cannot discriminate against debtor-tenants who filed for bankruptcy or couldn't pay certain debts that were cleared during bankruptcy.

Can a PHA terminate a lease if the debtor's rental debt is discharged?

No, they cannot.

• Normally, federal regulations allow a PHA to terminate housing assistance or deny admission if the tenant owes rent to the PHA or a different PHA (24 CFR 982.552(c)(1)(v)).
• However, if the tenant uses the law (bankruptcy case) to erase debt, a housing agency stop helping a tenant or deny admission just because a tenant owed them money. A PHA can ask to see a copy of the discharge order from the bankruptcy case.
• But, if there are other reasons the housing agency can't help you, they can still say no.

Does the Code protect debtors under the HCV Program?

For tenants in the Housing Choice Voucher (HCV) Program, the lease agreement is made with the property owner, not the PHA. So, the PHA cannot end the lease. If the debtor's rental debt to the property owner is discharged through bankruptcy, the PHA likely cannot end their housing assistance.