Can Bankruptcy Be Used to Stop An Eviction?

Although your Chapter 7 or Chapter 13 case can stop an eviction, it is not a perfect remedy.  Often, filing a bankruptcy will only create a delay of a few weeks in the eviction process.  Bankruptcy seeks to balance your access to a fresh start with “fairness” to creditors.   The amount of “fairness” a creditor gets depends on the status of that creditor.

Unsecured creditors like credit card companies, doctors and hospitals usually get the least amount of protection.   Car lenders, mortgage lenders and other secured creditors get enhanced protection under the Bankruptcy Code.

Landlords Get Enhanced Protection Under Bankruptcy Code

Rental property owners also get enhanced protection under the Bankruptcy Code.  If you want to stay in your rented premises, you must offer your landlord sufficient “adequate protection” if you want to stay.

In a Chapter 7 case, the bankruptcy filing will stop the eviction but you cannot remain in your home unless the landlord agrees.   Just like the reaffirmation process for car loans or mortgages, the “assumption” of a residential lease contract is subject to the agreement of the landlord.

If the landlord wants you out, he can file a Motion to Lift Stay and there is a good chance that the bankruptcy judge will lift the bankruptcy stay and allow the landlord to proceed with eviction.

In a Chapter 13, you may be able to include your missed residential lease payments in your Chapter 13 plan.  However, the landlord is not under any obligation to renew your lease and the bankruptcy judge may impose “strict compliance” conditions on your lease whereby the automatic stay may be lifted if you fall behind on your post-petition lease payments.

Erosion of Automatic Stay Protection for Tenants

Finally, the October, 2005 changes to the Bankruptcy Code added several new provisions that apply to landlords and tenants.  These new provisions give landlords added rights in the event that a tenant is causing damage to the rental property or in the event that the landlord already has an eviction judgment prior to the time the bankruptcy is filed.

If you are facing an eviction, a bankruptcy filing may buy you a few weeks but it might not eliminate your underlying problem.  On the other hand, the sooner Clark & Washington can evaluate your situation, the more effective we can be in tailoring a solution for you.

Remember: if you have ANY questions, please do not hesitate to call us for a free telephone consultation at 865-977-0121.