Can Bankruptcy Stop an Eviction?

Most people assume that because bankruptcy will stop a lawsuit, it will also stop an eviction lawsuit.  In most cases, a typical filing will only stop an eviction lawsuit temporarily, it will not stop the eviction permanently.  If you can bring your rent payments current, your landlord may agree to a “pay and stay,” which means you pay your rent in full and your landlord lets you stay.  But can bankruptcy stop the eviction lawsuit if your landlord will not agree to a pay and stay?

Can Bankruptcy Stop an Eviction in San Diego?

Filing a Chapter 7 case can stop an eviction in San Diego, but if your landlord will not agree to a pay and stay, then in most cases your Chapter 7 filing will only temporarily stop the eviction.  The eviction action will ultimately proceed and a judgment evicting you and returning possession back to your landlord will be inevitable at some point.  If you file for Chapter 13, you can repay your past due rent payments over a three to five year period and permanently stop the eviction.  The effect of a bankruptcy filing on a pending eviction lawsuit depends on certain other factors, such as the type of property, and other issues your lawyer will have to consider.  A San Diego bankruptcy lawyer can advise you as to the effect that your filing will have on an eviction, and only after thoroughly assessing your entire financial situation.  Here are some general principles that your attorney will want to consider.

Pay and Stay

When you file bankruptcy in San Diego, all lawsuits, including an eviction (which is a type of lawsuit filed against you in Superior Court), will freeze by virtue of the automatic bankruptcy stay.  In a Chapter 7 case, your landlord can, and usually will, go to the court and ask for permission to continue the eviction lawsuit notwithstanding your filing.  Absent highly unusual circumstances, the court will grant your landlord permission to continue with the eviction in a Chapter 7 case. Once the permission, called “relief” from the automatic stay, is granted, your landlord will continue to evict you.  If you can get your landlord to voluntarily agree to a “pay and stay,” you can remain at your rented home.  Otherwise, you will be forcefully evicted.

Chapter 13 Repayment- Residential Only

If you qualify to file Chapter 13 you can use this remedy to permanently stop an eviction and bring your rent current through a Chapter 13 repayment plan.  Chapter 13 can be a great way to stop an eviction and keep your apartment and avoid the hassle and expense of moving. For this remedy to work in your favor, your Chapter 13 plan must propose to bring the lease current promptly, i.e., within a short amount of time. Federal bankruptcy law governing executory contracts and unexpired leases provides that a lease of residential property which is in default may not be assumed by a debtor unless it is promptly brought current. The court has broad discretion in determining what constitutes promptness with respect to bringing a lease current, but repayment of past due lease payments over a 3-5 year Chapter 13 plan period is generally not considered prompt repayment. You would generally want to bring the lease current by the time of plan confirmation or propose to do it shortly thereafter. This remedy is only available for residential evictions, not commercial evictions.   Bankruptcy will not stop a commercial eviction where the lease has been terminated already, and a commercial lease can be terminated in a variety of ways, including the very simple method of serving a 3-day Notice.

I Need to File Bankruptcy Anyway?

Because a Chapter 7 filing usually results in only a temporary delay of an eviction, your attorney generally will not recommend that you file a Chapter 7 case solely to stop an eviction.  But if you are facing an eviction, it is likely that you have suffered one or more financial setbacks, which made it difficult for you to pay your rent on time.  You may need to file bankruptcy anyway.  In such a case, and assuming you qualify for bankruptcy, you may want to accelerate your Chapter 7 filing, so that it has the added effect of stopping an eviction.  That way, you will get the debt relief you need by filing Chapter 7, and your filing will have the added effect of temporarily stopping the eviction lawsuit, giving you some more breathing room.  It may be valuable to you to have some more time to weigh your options and possibly find the money to be able to negotiate a pay and stay with your landlord.  If you can’t negotiate a pay and stay, or if your landlord just does not want to deal with you, it may be prudent to voluntarily leave the property soon so that you do not incur liability for fair market rent after bankruptcy.

Other Tenants or Parties to Lease

If there are other tenants or parties to the lease, then you’ll want to carefully consider the ramifications of your actions.  The harder your landlord’s attorney has to work to evict you, the more attorney fees your landlord will incur.  For example, if you file bankruptcy and your landlord’s attorney has to go to the San Diego bankruptcy court to obtain permission to continue the eviction action, then that means more attorney fees and costs that your landlord incurs and all tenants to the lease will ultimately be liable for, assuming the lease has an attorney fees clause.  If there are other tenants, and you care about their interests, you’ll want to keep the landlord’s costs and attorney fees to a minimum.

Judgment Already Entered

If a judgment for possession has already been entered, then a San Diego bankruptcy filing won’t stop an eviction.  An eviction judgment granting possession of the property back to your landlord is an exception to the automatic stay.  It is a unique type of judgment that the automatic stay does not affect.  That means that if your attorney files your case after your landlord has a judgment of possession, your landlord can have the sheriff forcefully remove you from the premises even though you hired an attorney to file a bankruptcy for you.  But there is an exception to this rule, under which you can stop an eviction by depositing rent with the San Diego bankruptcy court.

Depositing Rent With the Court

If your landlord has a judgment for possession, and you in good faith believe that you are legally entitled to cure the entire monetary default that gave rise to the judgment for possession, after the judgment for possession was entered, then bankruptcy can stop an eviction.  To exercise this right, at the time that you file bankruptcy, your lawyer will have to deposit with the court any rent that would become due during the 30-day period after your bankruptcy is filed and your lawyer will have to give proper notice to your landlord.  You will then have to become current within 30 days and timely file a certification with the court stating that you have become current.  It is rare, though, that you’ll have a right to cure a default after a judgment of possession.  If you feel that you do, discuss this with your lawyer.

This entry was posted in Eviction.


Comments are closed.

call buttonCall