In New York City, there are over one million apartments that are rent regulated. In a case filed last year, one such apartment became the focus of an appeal when the renter claimed her regulated apartment was a “local public assistance benefit” exempt from her bankruptcy estate.
The matter originated in a Chapter 7 bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of New York. Whereas New York is one of many states opting out of federally approved bankruptcy exemptions to list their own, the filer was subject to those exemptions under New York Debtors and Creditors Law, which states in part:
“Bankruptcy exemption for right to receive benefits. The debtor’s right to receive or the debtor’s interest in: (a) a social security benefit, unemployment compensation or a local public assistance benefit.” [Emphasis added]
In a unique complication, under New York’s rent regulation laws, renters of certain dwellings have both a right to regulated rent increases, and a right to automatic lease renewal under normal circumstances. It is these inherent rights that gave rise to an interest upon which the lease and property owner placed a value by offering to “buy-out” the filer’s interests in her lease.
When the trustee told the filer he intended to accept the building owner’s offer, she amended her filing to remove the apartment lease from a “standard lease” listed on Schedule G, to a protected exemption on Schedule B as a “local public assistance benefit.”
The trustee moved to strike this amendment, which the Bankruptcy Court granted. The filer appealed to the District Court for the Southern District of New York in its capacity as a bankruptcy appellate court, which affirmed. Subsequently, the filer appealed from the District Court to the 2nd Circuit Court of Appeals.
A Certified Question
In its consideration of the matter, the 2nd Circuit found that a novel issue had been raised before it: “Whether a debtor-tenant possesses a property interest in the protected value of her rent-stabilized lease that may be exempted from her bankruptcy estate pursuant to New York State Debtor and Creditor Law section 282(2) as a ‘local public assistance benefit.'” Finding also that it was not the best court to reach an answer, the Court stayed the matter pending a certified inquiry to the Court of Appeals of the State of New York.
The question was certified on March 31st and sent to the Court of Appeals of the State of New York, which is presently considering whether or not to answer.
9th Circuit Fills 9-year Open Seat
Congratulations to the Honorable Judge John Owens, whose judgeship was approved in a Senate vote on March 31st to end a nine-year-long debate over the 9th Circuit seat. The seat had been the subject of enduring contention between senators from the states of Idaho and California.
The longest-running vacancy in the Judiciary is now seated by Judge Owens, formerly of Munger Tolles & Olson law firm, who clerked for U.S. Supreme Court Justice Ruth Bader Ginsburg in 1997, and was a federal prosecutor for 11 years in Washington and California.