How Can Bankruptcy Help You If You’re Facing Eviction
If you are facing eviction, or know someone who is, bankruptcy can help. Whether you want to stay at home, or leave without the back rent debt following you, there are solutions in filing bankruptcy.
Let’s discuss what eviction is. Eviction is a legal process that ends in a judgment recorded with the clerk of the court. With that judgment, the landlord can have law enforcement remove the renter from the residence. You can dispute the eviction under certain circumstances. For example, if you believe you are being evicted as retribution, or due to your race, you may want to contact a landlord-tenant attorney. Bankruptcy deals only with the debt associated with eviction, not the basis for eviction.
If you have fallen behind on your rent payments, bankruptcy can either eliminate (“discharge”) that debt, or give you time to catch up on your rent payments. Once a bankruptcy is filed creditors are prohibited from any attempts to collect from you. This is called the automatic stay: automatic, in that nothing needs to be done once you file – it happens automatically, and stay, as in stay away, bill collectors! Collection activity can be many different things: asking you for money, sending a bill, filing a lawsuit for collection or eviction, even reporting an amount due on your credit report. All of these are forbidden once a bankruptcy is filed.
If you are behind on your rent and believe you may be facing eviction, bankruptcy could help you, but your attorney will need to know what your plans are in order to guide you. For example:
- If you want to stay in the rental, but need time to catch up on payments, you may want to consider filing a Chapter 13 bankruptcy petition. In a Chapter 13, you make monthly payments that are tailored to your budget, allowing you time to catch up while also providing you with the protection from eviction.
- If you want to move out of the rental, a Chapter 7 may be better suited for you. In a Chapter 7, there is no monthly payment (as in a Chapter 13). You can “reject” your rental lease, and the back rent is forgiven (“discharged”).
Of course, your specific situation will also determine which chapter to file. For example, if you do not have any monthly income, or insufficient monthly income, making a Chapter 13 monthly payment will be impossible. Or, if you prefer to file a Chapter 7 but have high income, you may not qualify for a Chapter 7 and may need to consider a Chapter 13. (If you are in this situation and do want to leave the rental, you can still do that in a Chapter 13.)
As with many other parts of life, timing is everything. Waiting until after an eviction is filed, or even after a judgment has been entered, limits your options. It’s best to be proactive. An eviction has several steps:
- A verbal request for late rent;
- A 3-day “Pay or Vacate” notice;
- Filing of an eviction lawsuit. A hearing will be scheduled at least 10 days after the petition is filed;
- Eventually, a judgment will be entered. There can be no action for 5 days after the judgment is entered;
- Writ of Possession: 24 hours after the court issues a writ of possession, the renter and possessions are removed from the rental.
The best time to file a bankruptcy – the time that gives you the most options – is during or before the Pay or Vacate notice. At this point, there is nothing filed with the courts, so your next landlord will not see any “red flags.” Moving to a new rental will be easiest at this point. Furthermore, filing a bankruptcy before any court action simplifies the proceedings considerably.
If an eviction petition has been filed, but no judgment has been entered, filing your bankruptcy will stop a judgment from being entered. Your next landlord will not see anything about the eviction petition on a credit report, but if they check court filings, they may see a “red flag” on the court website. A bankruptcy can still stop collection from the landlord, and if you so choose, give you time to catch up on rent.
Once a judgment has been entered, you can still file your bankruptcy to buy yourself some time to either catch up on rent (through a Chapter 13) or to move. The judgment will likely show on a credit report, which future landlords will see. This could limit your options as you search for a new home to rent. Bankruptcy cannot remove the judgment from your credit report—it only addresses the debt coming from that judgment.
Bankruptcy can help if you have fallen behind on rent. With eviction moratoria across the state ending on December 31st, it is best to be proactive, and call us today for a free consultation.
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