Generally, when a bankruptcy petition is filed, collection actions are automatically stayed. The purpose of this stay is to give the debtor some breathing room and time to sort out financial difficulties. If the debtor is behind on rent payments, the bankruptcy automatic stays the commencement or continuation of an eviction action. The automatic stay prohibits the landlord from any attempt to collect rents that accrued prior to the bankruptcy filing date. The landlord may not write or call the debtor in an effort to collect these rents, and may not start or continue a lawsuit to evict.
The bankruptcy automatic stay will not relieve the debtor from his obligation to pay rent after the bankruptcy filing date. If the debtor/tenant falls behind on rent payments after the bankruptcy is filed, the landlord may evict regardless of the bankruptcy, but cannot seek payment of rents that were due before the bankruptcy case was filed. If the debtor in bankruptcy is not behind on rents at the time the bankruptcy case is filed, the landlord is not a creditor and will not receive notice of the bankruptcy filing. However, the debtor must account for any rent deposit on his bankruptcy schedules.
In some circumstances a landlord may complain to the bankruptcy court that the tenant is endangering the property or using controlled substances illegally on the property. See 11 U.S.C. § 362(b)(23). The landlord must file a certification to the bankruptcy court and the tenant has 15 days to respond. The court must hold a hearing within 10 days. If the landlord is successful in this complaint, the court will lift the automatic stay and allow the eviction process to continue.
If the landlord has obtained a judgment for possession and order of eviction before the bankruptcy case is filed, the legal process is more complex. See 11 U.S.C. §§ 362(b)(22) and 362(l). The debtor must deposit one month of rent with the bankruptcy court immediately upon filing the bankruptcy petition along with a certification stating that the landlord’s judgment permits the debtor to stay in the premises upon satisfaction of the entire judgment amount. This filing stays the eviction process for thirty days. If the debtor wishes to remain longer, the amount stated in the judgment for possession must be paid within the thirty day period.
If you’re interested in filing for bankruptcy contact the experienced attorney’s at Fears Nachawati for a free consultation. Call our office at 1-866-705-7584 or send an email to fears@fnlawfirm.com.