Though everyone wants to own their home, the reality is that most people – particularly those who live in large cities – end up renting. Higher property values, smaller spaces, and the need for flexibility make renting far more attractive than owning a house or apartment.

With renting, however, comes some significant uncertainty. A landlord may decide to raise the rent beyond your ability to pay, the property may get sold, or the owner can choose to kick everyone out tear down the place entirely.

Large cities like Los Angeles and New York City have extensive tenant protections that can delay the process and provide an opportunity to catch up on past due rent payments. When the landlord’s demand for payment exceeds your abilities, however, you may think there’s no way to keep your home.

Thankfully, the bankruptcy laws provide an additional source of protection from eviction.

Filing for bankruptcy may stop an eviction

Commencing a bankruptcy case causes an “automatic stay” to take effect immediately. This automatic stay prevents your landlord from starting or continuing any eviction process that was or could have been commenced before you filed for bankruptcy. It also stops the landlord from trying to collect any money you owed when you filed your bankruptcy case.

If you’re past due on your rent, filing for bankruptcy will prevent the landlord from filing an eviction case against you in court. Not only that, your landlord won’t be able to keep billing you for past due rent while you’re in bankruptcy.

Overcome bankruptcy’s limited power in the face of an eviction judgment

The automatic stay, though powerful, has limitations. For example, the automatic stay won’t stop an eviction if the landlord gets a judgment of possession before you file your bankruptcy case.

If you’re at the end of the eviction case and still want to stay in your home, you will need to deposit the full rent that’s due within 30 days with the bankruptcy court the day your case is filed. You’ll also have to submit a certification that you’ll be able to cure the entire arrears and that the law would otherwise allow you to do so.

It’s only by depositing the money with the court and submitting the proper certification that the automatic stay will protect you from being thrown out of your residence.

Repeat bankruptcy filers face challenges for battling landlords

People see bankruptcy as a law protecting somebody from their creditors. Still, its real purpose is to create fairness between creditors and those who owe money. That idea of equity runs through the entire bankruptcy system and, though far from perfect, provides both debtors and creditors with peace of mind and consistency of outcome.

That notion of fairness and equity requires limits on the automatic stay when someone files multiple cases in a short time. For example:

  • If you file for bankruptcy within a year of having an active prior bankruptcy case dismissed, the automatic stay automatically expires after 30 days.
  • If you file for bankruptcy and have had two or more active bankruptcy cases dismissed within the past year, the automatic stay doesn’t go into effect at all.

The goal of these limitations is to make sure people use the bankruptcy court honestly, and not as a way to repeatedly delay other processes.

But there are many valid reasons for judges to dismiss cases. For that reason, the bankruptcy judge can extend the automatic stay when you provide proof that you’ve been acting in good faith.

Catch up on past due rent using Chapter 13 bankruptcy

Chapter 13 bankruptcy involves creating a court-approved plan to repay debts over 3-5 years based on household income and allowable expenses. You’re not required to give up any property and continue to live your life without living in fear of your creditors. At the end of the case, most of the remaining unpaid debt that is discharged by court order.

When it comes to dealing with past due rent, Chapter 13 serves as a uniquely powerful tool. Using Chapter 13, you can effectively force your landlord to accept a payment plan that’s a lot longer than might otherwise be ordered in an eviction case. So long as you make all new monthly rent payments on time, Chapter 13 bankruptcy will give you the time you need to catch up on the rent without fear of losing your place.

If you want to move out or have already left

Chapter 13 lets you repay the rent arrears over time, but you might want to move out and wipe out the debt altogether. That’s where Chapter 7 bankruptcy – what some people call “straight bankruptcy” – might be a better option. Not only is past due rent forgiven, so are your late fees and other costs the landlord incurs in connection with the apartment.

Even if you’re not past due on the rent, Chapter 7 serves as a useful tool for anyone looking to move before their lease ends. By allowing you to reject your liability under a lease, the bankruptcy laws can terminate your responsibilities immediately and leave without worrying about the landlord in the future.

Special rules apply if you’re being evicted for non-monetary reasons

Landlords try to evict tenants for lots of reasons other than past due rent. A tenant may have unauthorized pets, be the cause of numerous complaints by neighbors, or do illegal things. The landlord might want to empty the premises for sale or demolition. The place may even be unsafe.

In such situations, filing for bankruptcy to halt an eviction can be more difficult. Without the need to catch up on past due rent, Chapter 13 makes no sense. Chapter 7 will wipe out any financial obligations to the landlord, but there’s no money at stake here.

The only reason to use the bankruptcy system is to give you time to figure out your next move. And in some situations, that’s more of a problem.

If you file your case after the landlord gets an order of possession, you can use the automatic stay only by certifying that state law lets you cure the monetary default. When the Judgment doesn’t arise from a failure to pay rent, however, that certification won’t have any effect on the automatic stay.

Without a way to invoke the automatic stay, it becomes critical for you to consider filing for bankruptcy before the landlord gets an order of possession. Waiting too long will limit your ability to retain control over the situation and leave the premises on your own terms.

Stopping an eviction using bankruptcy is a matter of timing

If you’re facing possible eviction, bankruptcy can help you catch up on past due rent, wipe out legal obligations under the lease, or give you more control over the situation.

Your options, however, may be limited if you wait too long. On the flip side, the need to prepare for bankruptcy may mean waiting to file your case. Review your situation with a bankruptcy lawyer early in the eviction process (ideally with your landlord-tenant lawyer), so you can adequately plan for the best outcome.

ABOUT THE AUTHOR

Meet Jay

Since I became a lawyer in 1995, I’ve represented people with problems involving student loans, consumer debts, mortgage foreclosures, collection abuse, and credit reports. Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels. I wrote every word on this site.

I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.

I played a central role in developing the Student Loan Law Workshop, where I helped to train over 350 lawyers on how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.

I’m licensed to practice law in New York and California and advise federal student loan borrowers nationwide.

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