How a Tenant Bankruptcy Affects a Landlord's Right to Evict

Whether a tenant files for bankruptcy before or after an eviction judgment affects the steps a landlord must take to regain possession of the rental unit. Understanding how the process unfolds can help you to avoid losing your rented dwelling.

This article outlines how a tenant’s bankruptcy affects an eviction. Learn how the automatic stay protects a tenant, what steps a landlord must follow to legally regain possession, and more.

Facing bankruptcy and a potential eviction can have lasting repercussions. But legal support is available. Talk to an attorney near you for help navigating eviction proceedings, the bankruptcy process, and available legal protections.

Understanding the Bankruptcy Process

Bankruptcy is a legal process through which a person or company can discharge their debt. Sometimes, individuals and companies take on more debt than they can handle. Bankruptcy helps alleviate this burden through the bankruptcy discharge. This removes their legal liability for their debts.

Bankruptcy Options

Under the federal bankruptcy code, individuals and married couples have two bankruptcy petition options. The choices are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Under federal law, only legally married couples and individuals can file a joint bankruptcy petition. Domestic partnership status is not universally recognized for joint filings and depends on state law and local bankruptcy court practice.

Chapter 7 bankruptcy is the most common type of bankruptcy filing. Under this chapter, the petitioner(s) can discharge almost all their debts for a fresh start. The bankruptcy trustee often sells some of the petitioner’s property to pay their debts, and the process can negatively affect their credit rating.

Under Chapter 13 bankruptcy, the petitioner enters into a court-ordered payment plan, which gives the petitioner(s) time to pay off their debts. If successfully completed, it allows for quicker credit recovery.

How Bankruptcy Works

Bankruptcy cases begin when a petitioner files a bankruptcy petition in a federal bankruptcy court. This petition should contain a list of the petitioner’s assets and debts. The bankruptcy petition’s official filing creates an estate that the bankruptcy trustee administers.

The trustee makes all official decisions for the estate, including whether or not to sell assets to liquidate (Chapter 7) the estate.  Creditors can object to the bankruptcy in a creditors’ meeting under a Chapter 7 filing. After the liquidation, the bankruptcy judge can discharge the petitioner’s debts.

In a Chapter 13 bankruptcy, the petitioner creates a repayment plan and submits that plan to the bankruptcy court. The repayment period is three to five years. A bankruptcy trustee will review the plan before submitting it to the court.

Chapter 13 bankruptcies extend for a few years, which means the petitioner’s debts are not immediately discharged. Chapter 13 bankruptcies discharge debts after the payment plan ends.

Anyone considering bankruptcy should speak to a bankruptcy attorney. Having an expert in bankruptcy law on your side can make a huge difference.

Bankruptcy and Eviction Judgments

Before 2005, a tenant’s bankruptcy could impede a landlord’s ability to proceed with a court-ordered eviction proceeding. A tenant could easily stop an eviction by filing for a Chapter 7 or Chapter 13 bankruptcy. Once the tenant filed for bankruptcy, an “automatic stay” prevented all creditors, including landlords, from pursuing debt repayment.

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act altered this. A landlord can now evict a tenant, despite the automatic stay, if they have an eviction judgment.

An eviction judgment is the final step in the eviction process. The eviction process starts when the tenant violates the lease in one of the following ways:

• Nonpayment of rent/past due rent
• Violation of terms of the lease or rental agreement
• Illegal conduct on rental property

The landlord then gives their tenant a notice to vacate the property in accordance with state or local law. If the tenant refuses, the landlord can go to court to seek an eviction order, starting the eviction case. The court will hold a hearing and reach a conclusion.

If the court finds in favor of the landlord, it will issue an eviction judgment or judgment of possession. The landlord can then ask law enforcement to carry out the judgment.

The timing of the eviction case and the eviction judgment determines how a tenant’s bankruptcy can affect a landlord’s right to evict.

If the landlord has a court-ordered judgment of possession before the tenant files for bankruptcy, the automatic stay does not apply. The landlord can proceed with the eviction, except in cases of nonpayment of rent.

Nonpayment Exception

Some state laws allow a tenant to remain in the rental unit and “cure,” or pay the back rent, after an eviction judgment. The tenant can stop the eviction process by taking these steps:

• File a certification, or a sworn statement, with the bankruptcy court stating that state law allows a tenant to stay in the rental unit and pay the delinquent rent after the issuance of an eviction judgment.
• Deposit the amount of rent due within 30 days of filing the bankruptcy petition with the bankruptcy court clerk.
• Serve the landlord with a copy of the certification.

The tenant has 30 days from filing the certification to pay the amount owed. If the tenant cures the default, then they must file a second certification with the bankruptcy court and serve the landlord. A landlord can object to either certification, which prompts the bankruptcy court to a hearing within ten days of the objection. If the landlord prevails, the court will lift the stay, and the eviction may proceed.

Eviction Judgment After Tenant Files For Bankruptcy

If the tenant files for bankruptcy, the automatic stay will prevent or delay the landlord from starting the eviction process. The landlord can ask the bankruptcy court to lift the stay. 

There’s a good chance the court will rule to lift the stay. As paying rent isn’t an asset, a lease agreement does not affect the value of the tenant’s estate.

Illegal Drug Use and Property Endangerment

A landlord can proceed with an eviction after the tenant files for bankruptcy if the reason for the eviction is for the following:

• Illegal drug use on the property
• Property endangerment

The landlord must provide the bankruptcy court with certification that illegal drug use occurred on the property or that the tenant endangered the property within the past 30 days. They must then send the tenant a copy of the certification.

The landlord can proceed with the eviction after 15 days unless the tenant files an objection with the court and serves the landlord. If so, the court will hold a hearing within ten days. To stop the eviction, the tenant must show they remedied the situation or that the landlord’s statement was untrue. If they cannot, the court will allow the landlord to proceed.

Issues With an Eviction? Talk to an Attorney

Tenant bankruptcies involve landlord-tenant and bankruptcy laws. If you are simultaneously dealing with a tenant bankruptcy and an eviction, you should speak to a qualified landlord-tenant attorney. They are experts in landlord-tenant law and can give you sound legal advice. Whether you’re a tenant or a landlord, consulting a landlord-tenant attorney can increase your chances of getting the best possible outcome.

FindLaw’s directory of landlord-tenant lawyers can connect you with qualified legal help near you. Because state and local laws are relevant, your attorney should be licensed in the state where you live. Enter your city or ZIP code for a list of legal professionals in your area. Your search results will also show important details about prospective attorneys, like ratings, areas of practice, and whether they offer free consultations.