When life events lead to financial emergencies many people ask if bankruptcy might be an option to help them get back on their feet with a fresh financial start. In many instances people considering bankruptcy are renters with leased homes or apartments. In the event a bankruptcy petitioner is behind on rent and facing potential eviction there are options for a tenant and their landlord regarding leases and evictions. The bankruptcy code considers a landlord a creditor entitled to notice of bankruptcy proceedings. Even if rent payments are current and have always been paid on time, the landlord is still required to receive notice of the bankruptcy petition. There are options available to tenants seeking to keep their home or apartment lease while proceeding through bankruptcy.
The automatic stay provision may affect landlords and their tenants in bankruptcy.
Prior to 2005 when the bankruptcy code was updated, the “Automatic Stay” provision of the bankruptcy code prevented landlords from continuing the eviction process while a tenant is in bankruptcy. The automatic stay provision takes effect when an individual files their petition for either Chapter 7 or Chapter 13 bankruptcy. The automatic stay stops creditors, collectors and landlords from pursuing the repayment of old debt. To learn more about the automatic stay provision, please read our article titled, Examples of the automatic stay and how it operates in bankruptcy law.
Was the bankruptcy petition is filed before or after the landlord obtains an eviction judgment?
Since the 2005 change in the law, landlords may now ignore the automatic stay provision and continue with eviction, but only if the landlord obtained the eviction judgement before the tenant filed for bankruptcy protection. In the instance that the tenant already filed a petition for Chapter 7 or Chapter 13 bankruptcy, the landlord may not proceed with an eviction without taking a few extra steps and seeking the approval of the federal bankruptcy court. The landlord has the option to ask the court to lift the automatic stay as it applies to the eviction, and in most cases the court will allow the eviction to proceed, despite the bankruptcy, because the lease agreement has no effect on the value of the tenant’s assets and liabilities.
Joseph Wrobel, Ltd. counsels individuals considering bankruptcy who also have landlord-tenant questions and concerns.
Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.
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