Can Bankruptcy Prevent An Eviction for a Renter?
If you pay rent for your housing, and you file for bankruptcy, how it will be affected will depend on whether you are behind in your payments, if your landlord has started eviction proceedings, and whether the landlord takes any other action in bankruptcy court.
Filing for bankruptcy will not relieve you of your obligation to pay rent, although it may help with any arrearages, depending on your situation.
If you are not behind in your payments, then continue to pay your rent, so your landlord does not need to be notified of your bankruptcy, and probably won't even find out about it. However, list any rent deposit as assets in your bankruptcy petition. Usually, it will be within the exemption limit, so the trustee will not seek it to pay creditors.
If you are behind in rent, but the landlord has not yet gotten an eviction order from the court, then the automatic stay that results from filing for bankruptcy will stop the eviction, unless the landlord successfully files a motion with the bankruptcy court to lift the automatic stay. However, once the bankruptcy petition is filed, you must stay current with rent payments; otherwise, the landlord can evict you, because the automatic stay does not affect any debts incurred after the filing. But even if you stay current with rent payments, some states will allow a landlord to evict you, anyway, although your back rent will still be discharged.
If your landlord obtains a judgment for possession before you file for bankruptcy, then the landlord may proceed with the eviction, unless you can successfully challenge it in court. However, to successfully challenge a pending eviction in court, the laws in your state must allow this. If your state allows it, then you have to:
- File a certification with your bankruptcy filing that your state allows you to stay on the premises if you pay the back rent, and deposit any rent due in 30 days with the bankruptcy court.
- This will prevent any eviction for 30 days, unless the landlord files a motion to object, in which case, the court must hold a hearing within 10 days.
- If the landlord doesn't object, then, to prevent eviction beyond the 30 days, file a 2nd certification within the 30 days that you paid the back rent.
- However, the landlord can also object to this, and if he does, then the court must hold a hearing within 10 days.
Most courts, if the landlord objects, will allow an eviction to proceed because it is his property, and since you don't own the property, it is not part of the bankruptcy estate, and cannot be used to pay any creditors.
There is a special case in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that allows a landlord to evict based on endangerment of property or the illegal use of controlled substances on the property, but only if the landlord files with the court, and serves the tenant, a certification under penalty of perjury that such an eviction action has been filed, or that the debtor, during the 30-day period preceding the date of the filing of the certification, has endangered property or illegally used or allowed to be used a controlled substance on the property.
Once this certification is filed, the tenant has 15 days to object to the truthfulness of the certification. The court must hold a hearing within 10 days, and if it agrees with the objection, then the automatic stay remains in effect; if the court disagrees with the objection, then the eviction can proceed.
Should a Landlord Rent to Someone Who Has Declared Bankruptcy?
Although someone who has recently emerged from bankruptcy may have a low credit score, he may be a better credit risk than others in his cohort, since most of his debts were probably discharged in the bankruptcy, although there are some debts that cannot be discharged. Additionally, bankrupts must wait a certain number of years before they can declare bankruptcy again, depending on what chapter they filed under previously (see Discharge Waiting Periods to Restrict Serial Filings for more information). Therefore, a landlord should consider whether the potential tenant has a steady job and income. If so, then the potential tenant would probably be a better credit risk than would be indicated by his credit score, although it would certainly help to check references and credit reports to see how debts and expenses were handled after the bankruptcy.