Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Rising rents, high mortgage rates, and ongoing financial pressures have made rental housing more complicated than ever in Wisconsin. For landlords, these challenges can sometimes lead to bankruptcy. For tenants, the word “bankruptcy” often sparks fear of losing their home.
But here’s the truth: bankruptcy does not automatically mean eviction or broken leases. Both landlords and tenants still have important rights and responsibilities under federal law and Wisconsin statutes.
This article breaks down what actually happens to rental properties during bankruptcy, how security deposits are handled, what eviction laws allow, and the key differences between Chapter 7 and Chapter 13. Whether you’re a landlord trying to protect your investment or a tenant worried about stability, understanding these rules will help you make informed decisions.
Filing for bankruptcy immediately triggers the automatic stay, which temporarily halts collection efforts, lawsuits, and foreclosure actions. This pause gives landlords breathing space while the case moves forward.
Under Chapter 7 bankruptcy in Wisconsin, landlords may have to sell off certain properties, including rental units, to pay creditors. The trustee decides whether selling the property benefits the bankruptcy estate. If sold, tenants might face changes to their leases depending on the buyer’s decisions.
In Chapter 13 bankruptcy in Wisconsin, landlords create a repayment plan to pay off debts over time. This option often allows them to keep their rental properties, providing more stability for tenants who rely on consistent housing.
Wisconsin exemptions, such as the state’s homestead exemption, may protect some real estate. However, rental properties do not always fall under these protections, making it vital for landlords to know what assets may be at risk.
Tenants often worry that a landlord’s bankruptcy means they will lose their home. In most cases, this is not true. The U.S. Bankruptcy Code §365 states that leases generally remain valid unless a trustee specifically rejects them. That means tenants usually continue living in their unit and paying rent under the same terms.
Wisconsin law also offers protections for tenants’ security deposits. Under Wis. Stat. §704.28, landlords must keep deposits in trust and return them within 21 days of a tenant moving out, minus allowable deductions. Bankruptcy does not remove this responsibility.
Even during bankruptcy, landlords must maintain the property and provide a habitable living environment. Tenants retain the right to safe housing, timely repairs, and essential utilities.
Wisconsin Stat. §704.28 requires landlords to return security deposits within 21 days, even during bankruptcy, subject to lawful deductions.
Bankruptcy can affect eviction proceedings, but it does not automatically block them. If a landlord has already obtained an eviction judgment before filing for bankruptcy, the process may continue. If the eviction is based only on unpaid rent, the automatic stay may temporarily delay it.
Tenants must remember that filing bankruptcy does not cancel their lease obligations. Rent must still be paid on time, or eviction may resume once the stay is lifted.
Landlords, even while in bankruptcy, must follow Wisconsin’s eviction procedures under Chapter 799 of the Wisconsin Statutes. This ensures tenants receive proper notice and due process. For more details, you can review the state’s guidance on Wisconsin eviction laws.
Security deposits are a frequent concern when landlords enter bankruptcy. Federal law treats deposits as tenant property that must be safeguarded. Wisconsin law strengthens these protections by requiring deposits to be held separately from the landlord’s other funds.
If a landlord misuses a deposit, tenants may have a claim in the bankruptcy case. While outcomes vary, most tenants can expect deposits to remain protected under state and federal law.
According to the U.S. Bankruptcy Code §365, lease agreements generally remain valid unless specifically rejected by the trustee.
The type of bankruptcy filed makes a big difference in how rental property issues play out.
|
Aspect |
Chapter 7 (Liquidation) |
Chapter 13 (Reorganization) |
| Landlord’s Property | Rental property may be sold by trustee | Landlord often retains property under repayment plan |
| Lease Agreements | May be terminated if burdensome | Typically continue if payments maintained |
| Tenant Stability | Higher risk of disruption | More stability for ongoing lease |
| Security Deposits | May be at risk if not held properly | More likely preserved under structured plan |
Bankruptcy affects both sides of a rental agreement, but preparation can make the process smoother. For landlords, keeping detailed financial records, maintaining compliance with Wisconsin landlord-tenant laws, and understanding how exemptions apply are critical steps. Cooperating with the bankruptcy trustee is essential.
For tenants, staying current on rent and keeping documentation of lease terms, payments, and communications helps protect their position. Tenants should monitor court filings if their landlord enters bankruptcy, as some decisions may directly affect their lease.
Sometimes, debt management plans or negotiated settlements may provide alternatives to bankruptcy. However, only a thorough evaluation with a Wisconsin bankruptcy lawyer can determine the right path.
No. Leases usually continue unless a trustee rejects them, meaning tenants must still pay rent and landlords must provide housing.
Deposits are typically protected by Wisconsin law and should be returned under state timelines, though outcomes may vary depending on the case.
The automatic stay may pause eviction temporarily, but tenants must still pay rent, and evictions may resume later.
Not right away. Tenants can usually remain until the property is sold or the lease is legally terminated.
Chapter 7 may involve property sales and disruption, while Chapter 13 typically offers more continuity for rental agreements.
Yes. Lease obligations continue unless changed by a court order, and missed rent may still lead to eviction.
Bankruptcy can be overwhelming for both landlords and tenants, but it does not erase leases or housing rights. Tenants remain protected under Wisconsin law, and landlords can sometimes keep properties through repayment plans. Security deposits, habitability standards, and eviction rules continue to apply during bankruptcy.
If you are a landlord or tenant facing bankruptcy issues, guidance from an experienced Wisconsin bankruptcy attorney can help you understand your rights and obligations. Debt Advisors Law Offices can provide the support needed to navigate these challenges with confidence. Contact us today for a free consultation and take the first step toward clarity.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
