Eviction Legal Issues Related to Bankruptcy
The federal Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it relatively easy for a landlord anywhere in the country to evict a tenant even if he or she has declared Chapter 7 or Chapter 13 bankruptcy. Before the law was enacted, tenants would try to stop their evictions by filing for bankruptcy to get an automatic stay. However, under the 2005 law, a landlord can proceed with an eviction if he or she has won a judgment for possession, even if the tenant files for bankruptcy and obtains an automatic stay.
While in most states bankruptcy provides little protection against a judgment for possession, a tenant in certain states can stop an eviction by filing for bankruptcy. In those states, tenants are permitted to cure the default and file a certification with the court.
The certification must correctly state that the state laws allow you to cure your default after the judgment for possession is entered, and it must be served on the landlord. Moreover, with the certification filing, you will need to deposit with the court clerk rent that would be due within 30 days of filing for bankruptcy. You have another 30 days from the bankruptcy filing to pay any arrearage and file a certification stating you have done so. If you successfully complete these steps, the automatic stay will remain in place, and you will not be evicted. However, if a landlord objects to the tenant’s certification on the grounds that it is untrue, the bankruptcy court will hold a hearing. The court will then lift the stay, and the landlord can proceed to evict.
A tenant has slightly more leeway if the landlord has not already won a judgment of possession. Even if the tenant becomes behind in the rent or violates a clause in the lease, a landlord is prohibited under the automatic stay from starting eviction proceedings. A landlord that hopes to evict the tenant must file with the bankruptcy court where the tenant filed and ask the judge to lift the stay.
When a tenant is using illegal drugs or endangering the property, however, a landlord may proceed with the eviction without asking the bankruptcy court to lift the stay. Instead, the landlord will prepare a certification that the tenant endangered the property or used illegal drugs on the property, and file it with the bankruptcy court. The tenant must be given notice and the opportunity to file an objection within 15 days of being served. If the tenant objects, the court will have a hearing in which both sides can present their arguments.
Can A Bankruptcy Affect a Tenancy Where the Tenant Is Not In Default?
A bankruptcy estate of all of a debtor’s non-exempt property is created when he or she files for bankruptcy. The trustee who administers this estate has the authority to decide whether the debtor can continue with his or her lease. Usually, a trustee lets the debtor keep the lease. However, if you are a debtor who is renting a place that is too expensive in light of your income, and there are other rentals with more reasonable rent, the trustee has the authority to terminate your lease and tell you to rent one of the more reasonable places instead.
Moreover, even if you are a tenant who has never been late with the rent, your landlord has the right to ask the bankruptcy court to demand that you show proof of your ability to pay rent in the future. The landlord can ask the bankruptcy court to lift the stay if you default on your rent during bankruptcy. Bankruptcy judges usually honor a landlord’s request to lift the automatic stay.
