By the time people declarebankruptcy, it is not uncommon for people to be behind on their rent, sometimes facing eviction. Past due rent is sometimes dischargeable in bankruptcy just like credit card and medical debt. Filing for bankruptcy may stay an eviction proceeding temporarily and can allow the tenant to save up money for past due rent, work with the landlord to allow them to stay in the rental, or give them time to find a new residence.
Today’s post will address common questions we get from renters.
Does Filing Bankruptcy Stop a Rental Eviction?
In many circumstances a bankruptcy filing can stop a rental eviction. When you file a bankruptcy, an order called the “automatic stay” is put into place to let your creditors know they need to stop all collection efforts against you. This applies to your landlord, and the landlord cannot start an eviction proceeding against you while you are under the protection of the automatic stay without getting permission from the court. You will need to figure out if your landlord is willing to let you catch up on the rent or if they will insist that you move out. Below is an example scenario and how past due rent payments are handled in chapter 7 or chapter 13 case.
Example: You are two months behind on rent payments of $1000 per month, or $2000 behind. You would like to stay in the apartment due to location, kids’ schools, and it is unlikely you can come up with first and last month’s rent for a deposit at a new place. The landlord has told you they will start eviction proceedings next month if you are still behind.
Under Chapter 7
If you file under Chapter 7, are behind on rent, and you want to stay in your rental, you will need to “assume” the lease. This is typically done when you file and through your bankruptcy attorney, you will complete and file a “Statement of Intention” indicating you would like to assume the lease. After the filing there is little time to catch up past due rent and you will need to get current (pay the $2000 you owe) within a month or two of filing. You must also keep up with current rent payments going forward. Chapter 7 filings are completed in a short time frame (between 4 and 6 months) and often it is just not long enough to catch up on rent, leaving you again facing eviction again after the Chapter 7 is completed. A Chapter 7 filing often doesn’t help most people in these situations unless they have quick access to money that can get them caught up.
Under Chapter 13
Under a Chapter 13 you might be able to cure the default over a longer period of time. Using the same facts as above, you could propose to pay the back rent (the $2000) each month over a year or two through the Chapter 13 plan. Throughout the plan, you will keep paying your rent as you were before you defaulted. Your landlord can object to this treatment so it is not automatic.
The above scenarios cover when the landlord has not obtained a judgement for eviction. If there is already a been a judgement on the unlawful detainer lawsuit (an eviction) is it typically too late to save the lease and be able to remain in the apartment under any circumstances. There are some special circumstances where you can pay a deposit into the bankruptcy court to try and stop the eviction even after a judgement but these are very rare.
Any scenario where you want to stay in the property will require you to come current on the rent. You may also have a landlord simply refuse to renew your lease or they may have some other reason they can come up with for the eviction. In most cases the bankruptcy is only a temporary solution to stopping an eviction action.
What Happens if I owe Back Rent Before Filing Bankruptcy? Do I Still Owe the Money?
If you owe past rent but there is no threat of an eviction proceeding on hand you will still have issues. If you would like to stay in the property, you will be required to get current quickly if you file a chapter 7. If you file a chapter 13, you can try to roll the delinquent payments into the chapter 13 plan. If you do not wish to stay in the apartment, the back rent is treated as unsecured debt just like a credit card or medical debt. Remember that rent incurred after filing the bankruptcy cannot be discharged in the current bankruptcy. Also, if you stay in the rental after filing a Chapter 13, the landlord can request reasonable rental value for that month or two to be paid through your case. A landlord can always choose to be more lenient than the law allows and give you more time, but we can never guarantee that will happen.
Can a Landlord Refuse to Rent to Me After Bankruptcy?
Many people are concerned they may not be able to find a rental after filing for bankruptcy because of their credit history. A bankruptcy filing will stay on your credit report for 7 years if a Chapter 13 and 10 years if a Chapter 7, but that doesn’t mean someone won’t rent to you. Landlords take into account many factors when deciding on who to choose as a tenant. Things like the amount of income, employment history, and status of your bankruptcy case are examples. We do have clients that have trouble finding a rental while in an active Chapter 13 bankruptcy case and we often encourage them to move before filing if they plan on letting go of the rental they are in.
If you find yourself in the position of facing an eviction don’t wait to contact us. We may be able to at least temporarily stop things from moving forward. Please contact one of our bankruptcy attorneys and they will be happy to go over things with you.