Losing your home is a common concern for those filing for bankruptcy, but what about those who do not own their homes? What happens if you lease or rent your living space and you decide to file for bankruptcy? You might be surprised to learn bankruptcy can affect you regardless whether you rent or own.
In many cases, someone filing for bankruptcy may be facing eviction because they are behind on rental payments – just as mortgage payments are often an issue in bankruptcy. However, unlike a homeowner, when a renter files for bankruptcy it might not stop eviction proceedings, nor will it necessarily interfere with a landlord’s ability to begin the court-ordered eviction process.
Bankruptcy Does Not Protect Against Eviction
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it much more difficult to stop an eviction filing, even when you are in the process of a Chapter 7 or Chapter 13 bankruptcy. The automatic stay that prevents creditors from pursuing debt no longer has the same effect it once did on landlords and they can now evict tenants, as long as they have a court-ordered judgement for possession prior to the bankruptcy filing. Essentially, landlords have the power to ignore the automatic stay of a bankruptcy if they obtained a judgment of eviction prior to the debtor filing for bankruptcy.
Some states, such as New York, offer an exception if the eviction is due to non-payment of rent – tenants can continue living in the rental as long as they pay the current rent due and arrears. They must file a statement with the bankruptcy court, swearing they intend to pay the rent due and deposit the current rent and cure the arrears within 30 days.
If you have already filed for bankruptcy and are unable to make a rent payment, your automatic stay does prevent your landlord from giving you a notice of eviction. However, he or she can ask a federal bankruptcy court to lift the stay, and in most cases the judge will do so. The process gives you a bit of additional time to sort out where you are going to live, but chances are you will eventually be evicted.
Were You Committing Crime on the Property?
If your landlord has proof you are doing something illegal in the rental property, such as using illegal drugs, there is no need for the stay to be lifted before eviction. The landlord must, however, file a certification with the bankruptcy court stating the basis of eviction is due to illegal activity and not because of money (if the eviction action occurred prior to your filing) or provide the bankruptcy court certification you broke the law on the property within the past 30 days (if the eviction action began after you filed). If you object, there will be a hearing within 10 days at which you must establish you did not commit a crime on the property.
Not knowing what will happen next as far as your living situation can be frightening, especially when you are dealing with financial uncertainty. Though a bankruptcy attorney cannot protect you from eviction, he or she can help you sort through your financial issues and create a plan that will get you back on track. The relief bankruptcy offers could be enough to allow you to catch up with rent payments.
For more information or to ask questions about how bankruptcy can help you preserve your living arrangements, contact the law office of Frank J. LaPerch, PC at 845.942.5500.