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How filing for bankruptcy can help you avoid eviction

Do you rent your residence?  Is your landlord threatening to evict you?  If so, bankruptcy may help you avoid eviction.  In this article, I will discuss how bankruptcy affects eviction proceedings, how to determine if bankruptcy will be of benefit to you in stopping an eviction, and the requirements for stopping an eviction through bankruptcy.

How does bankruptcy stop an eviction?

In Arizona, a residential landlord cannot evict you without filing an eviction lawsuit in court, unless you voluntarily surrender the premises, or abandon the premises.  When you file for bankruptcy, the automatic stay immediately goes into effect.  The automatic stay prevents any action to collect on a debt that you owe, and also prevents most legal proceedings against you.  This means that once a bankruptcy is filed, a residential landlord cannot sue you for past-due rent.  It also means that once a bankruptcy is filed, the landlord cannot file an eviction lawsuit against you.  If an eviction lawsuit was filed before the bankruptcy, the automatic stay will halt the eviction lawsuit.  In short, as long as the eviction lawsuit is not yet completed when the bankruptcy is filed, the bankruptcy automatic stay will stop the eviction process.

Are there situations in which bankruptcy will not stop an eviction?

There are two situations in which bankruptcy will not stop an eviction.  The first is where the landlord obtained a judgment for possession of the property before the bankruptcy was filed.  A judgment for possession is a court order entitling the landlord to take possession of the property.  If the landlord gets this order before the bankruptcy is filed, then bankruptcy will not normally prevent the landlord from doing whatever is necessary to evict you.

The second situation is where the landlord claims you are endangering the property or illegally using drugs on the property.  In such cases, the landlord is also not prevented from evicting you after you file for bankruptcy.  However, in order to use this exception, the landlord must file a certification with the court swearing to the truth of such allegations.  Furthermore, if you disagree with the landlord’s allegations, you are able to dispute the landlord’s right to evict you under this exception.

For how long will bankruptcy stop an eviction?

The answer depends on what kind of bankruptcy you are filing.  If you are filing a Chapter 7 bankruptcy, then the automatic stay will terminate as soon as you get your discharge, which is usually about 4-5 months after the bankruptcy is filed.  In addition, the landlord can ask for permission to evict you sooner, and the court will normally grant that request.  So, in a Chapter 7 bankruptcy, you may delay the eviction by anywhere from a few weeks to a few months.  This may be sufficient if you just need time to find a new place to live.  However, if your goal is to stop an eviction for a longer term, then Chapter 7 may not be the right option.

If you file a Chapter 13 bankruptcy, you can stop the eviction for the remainder of your lease term, so long as you are able to provide adequate assurance that you will comply with the rental agreement, which includes paying any rent that you owe.  In Chapter 13, the landlord can also ask for permission to evict you, but that request is much less likely to be granted, especially if you pay your rent regularly after the bankruptcy is filed. (For more information on Chapter 13 bankruptcy, read our article on Common Questions About Chapter 13 Bankruptcy).

What happens to back rent after bankruptcy is filed?

If you are behind on your rent when the bankruptcy is filed, you will have to pay the back rent if you want to stay in the rental long term.  However, if you are getting only a temporary delay of the eviction, normally you will not have to pay the back rent.  In simple terms, this means that if you file a Chapter 7 bankruptcy, you will not have to pay back rent.  But if you file Chapter 13 bankruptcy, and request to stay in your apartment or house long term, you will need to pay the back rent in order to do so.  However, in most cases, you can catch up on the back rent over a period of several months or even years by paying it through your Chapter 13 bankruptcy plan.

Is the landlord required to renew my lease when I am in bankruptcy?

No, the landlord is not required to renew your lease.  So, if your lease expires six months after bankruptcy is filed, and the landlord chooses not to renew it, you would be required to leave the property, even if you are current on your payments at that point.  However, if the reason the landlord was trying to evict you is because you were behind on rent, and you catch up on the rent in bankruptcy before the lease expires, the landlord may be more willing to renew your lease.

Is bankruptcy the right solution to stop my eviction?

As you can probably tell by now, the answer to this question depends on several different factors.  To determine if bankruptcy will help you avoid an eviction and stay in your apartment or home long term, you should ask yourself the following:

  • Can you afford to pay the rent going forward?  If the answer is no, then bankruptcy will not help you avoid eviction, and you are better off finding a cheaper place to rent.  This is because you still have to pay your rent in bankruptcy.  If the answer is yes, then Chapter 13 bankruptcy could be the solution.
  • Has your lease already expired?  If your lease term has already expired, bankruptcy will not be of much help, because the landlord is not required to enter into a new lease agreement with you.
  • How long is left on the lease agreement?  If there are only a couple months left on the lease agreement, and you are not sure that the landlord will renew the lease, filing for bankruptcy to save the lease may not be worthwhile.  On the other hand, if there are many months or even years left on the lease, then bankruptcy would be of a much greater benefit.
  • Are there alternative living arrangements available?  If you can easily find another place to live, then incurring the cost of bankruptcy to avoid an eviction and save the lease may not be justified.  On the other hand, if you cannot easily find another place to live, either because of poor credit or because you require a home with unique features, then bankruptcy may be a good option.
  • Do you have other debt?  Although this issue is not dispositive, generally speaking, the more debt you have, the greater the benefit you can get from filing for bankruptcy.  So, if you have debt other than your rent, then bankruptcy will have a greater benefit, because you can resolve this other debt as well.

If staying in your home long term is not in your interest, but you need a few weeks to find a new place, and the landlord is not willing to give you that time, then Chapter 7 may be a solution, provided that you have debt justifying a bankruptcy.

How to stop an eviction through bankruptcy.

In order to stop an eviction through bankruptcy, the most important thing to remember is that the bankruptcy must be filed before the landlord obtains a judgment of possession against you.  Furthermore, if your intent is to stay in your home long term, it is best to file for bankruptcy before the landlord files the eviction lawsuit.  The reason is that, as discussed above, in order to retain your lease, you will have to comply with the lease terms.  Most leases require the tenant to pay the expenses of an eviction action that the landlord would win if no bankruptcy was filed.  Therefore, by filing for bankruptcy before the landlord files the eviction lawsuit, you save yourself from having to pay the landlord’s expenses in bringing the eviction lawsuit. 

In short, if you are facing an eviction, and are considering bankruptcy as a way to avoid the eviction, you should consult with a bankruptcy attorney as early as possible.

To learn more about bankruptcy, you may also be interested in these articles: 7 Mistakes to Avoid When Filing for Bankruptcy in Arizona

The above is provided for general informational purposes only. It is not intended to and does not constitute legal advice, and does not create an attorney-client relationship. If you need legal advice for your specific situation, you should contact a qualified attorney in your area.

Posted in Arizona Personal Bankruptcy Information.

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