3 ways bankruptcy can stop an eviction (and 3 ways it cannot)

Many people facing eviction often hear recommendations that filing bankruptcy can “stop” an eviction. While it is true that bankruptcy can help stop an eviction, this is true in some, but not all cases. Here, we decipher how bankruptcy can assist with stopping an eviction and how it will not.

Bankruptcy can sometimes help stop an eviction.

  • Bankruptcy can help stop an eviction by temporarily freezing the eviction case.

Bankruptcy temporarily “freezes” your eviction case through a legal concept called the “automatic stay”. After a Debtor has filed a bankruptcy case, creditors must stop all collection efforts against the Debtor for a period of time, unless the creditor gets permission from the bankruptcy court to continue their collection efforts. This protection from collection efforts is referred to as the “automatic stay.” The automatic stay applies in Chapter 7 and 13 cases.

The automatic stay may only be temporary, depending on the creditor’s collection efforts. In an eviction case, the landlord is the creditor who is taking collection efforts by filing an eviction. In many bankruptcy cases, a creditor (your landlord) will file a Motion for Relief from the Automatic Stay. This Motion asks the court to let the creditor out of bankruptcy and head back to state court to continue and finish the eviction case. Whether the creditor’s Motion will be successful depends on what chapter of bankruptcy you filed. If you filed a Chapter 7 and are not current in your rent payments, bankruptcy will not be able to stop an eviction. Your landlord’s Motion will be granted and they will be allowed to return to state court to continue the eviction.

  • Bankruptcy can help stop an eviction by allowing you to catch up on your missed rent payments.

If you file a Chapter 13 bankruptcy case, and if your Chapter 13 Plan shows that you will repay the landlord over time, the landlord’s Motion for Relief from the Automatic Stay will most likely be denied. Most bankruptcy courts call this “pay to play”. You will need to make payments in your Chapter 13 every month and on time in order to be able to stop an eviction. A Chapter 13 case can provide you with 36 to 60 months to catch up on your rent payments.

A successful Chapter 13 Plan will require you to pay your regular rent payment going forward AND a catch-up payment for the amount you are behind. For example, if your rent is $1,875.00 a month and you are five months behind on your rent payment, you owe the landlord $9,375.00. In a Chapter 13 Plan, your monthly payment would need to include the regular rent payment of $1,875.00 and a catch-up payment of $260.00 ($9,375.00 divided by 36 months). These payments would continue for thirty-six (36) months and once you complete all thirty-six payments, your rent would be caught up.

  • Bankruptcy can help stop an eviction by allowing you to leave the property and not owe the past due rent if your attempt to catch up in a Chapter 13 is unsuccessful.

Bankruptcy cases also allow you to leave the property if your attempt to catch up in a Chapter 13 is unsuccessful. Your attempt to catch up could be unsuccessful for a variety of reasons – loss of income, illness, a lack of income coming into the home, etc. Because the payments continue for thirty-six months, a lot can happen during that time. In many cases, a Chapter 13 bankruptcy and catch up plan is your last resort to saving your home. The bankruptcy case provides protection from your landlord and requires the landlord to stop an eviction. At the same time, your attempt to catch up may be unsuccessful and have nothing to do with your landlord. If you are unable to catch up due to insufficient income or too high of arrears (back payments), you may need to surrender your home.

If you are going to surrender home because you cannot catch up on the payments, you also want to make sure the debt is also wiped out. In an eviction case, when the landlord takes possession back of the property, you still owe the back rent payments (arrears). In a bankruptcy case, you can surrender the home and request that the debt on the lease be wiped out. This is an opportunity for you to get a fresh start. If your attempt at a Chapter 13 catch up plan was unsuccessful, converting your bankruptcy case to a Chapter 7 could allow you to walk away from the property and the debt.

Bankruptcy cannot always help stop an eviction.

  • Bankruptcy cannot help stop an eviction if you filed bankruptcy before and recently.

Bankruptcy courts are wary of renters/tenants who file bankruptcy often and frequently. A common scenario that Courts see is that a tenant files bankruptcy on the day before or morning of the eviction trial in an attempt to delay the landlord from getting the property back. Many times, tenants try to repeat this process over and over to keep the landlord from getting the property back. If you filed a bankruptcy case which was dismissed and you plan on filing another case, you need to consider if the new case will be considered to be filed in good faith or bad faith.

You can be considered a “serial” bankruptcy filer if you have filed more than 1 case in a 12 month period. If your first case was dismissed, the new bankruptcy case will not have the same automatic protection as earlier cases. In this second, new bankruptcy case, your automatic stay will end automatically 30 days after the filing, unless you file a Motion to Reimpose the Automatic Stay and you can show good cause why your first bankruptcy case failed and why this one will not.

If this is your third bankruptcy case filed within one 12 month period, the automatic stay will not go into effect at all. A third bankruptcy case will not stop an eviction. It is important to understand that the time frame is not calculated on calendar years, but rather a 12-month period. The 12-month period runs from the date of dismissal of the first case to the filing date of the second or third case.

  • Bankruptcy cannot stop an eviction to help you re-litigate your issues if a judgment was already entered.

It is important to understand where you are in your eviction before filing for bankruptcy. If an eviction judgment was entered on your case, you will not be able to re-litigate or re-argue some of the issues when you are in your bankruptcy case. A judgment in your eviction can sometimes be called Default Judgment, Summary Judgment, or a Final Judgment. The issues that cannot be re-litigated include standing (whether the right person sued you) or how much is owed to the landlord. If you believe there are issues regarding standing and/or the amounts owed to the landlord, the way to have those issues reviewed is through an appeal and not through the bankruptcy courts. It is important to understand there is a strict timeline for you to appeal a judgment. Make sure you understand when your deadline is.

  • Bankruptcy cannot help stop an eviction if you were already removed from the property.

Filing for bankruptcy is a significant decision with long-term effects on your credit. It is extremely important to evaluate your financial situation and explore all your options. Meeting with and having a consultation with an experienced bankruptcy attorney is a smart decision before deciding to file your case. Bankruptcy can offer relief from overwhelming debt, protect you from creditor harassment, and provide an opportunity for a fresh financial start. By understanding the circumstances in which filing a bankruptcy case can be a good idea, you can make an informed decision about your financial future.

If your situation is foreclosure, please review our article on how bankruptcy can stop foreclosure here.

If you are a business who is a tenant of commercial property and facing a business eviction, read our article on what you need to know about being a business tenant in bankruptcy here.

You can review your own eviction case by viewing the court records in the county you live in. For Pinellas County cases, you can check the court dockets here.

To schedule a free consultation regarding how bankruptcy may be able to stop an eviction, contact us at www.feherlaw.com or 727-359-0367.