Filing for Chapter 13 bankruptcy can provide some relief and may help you stop an eviction, but it's important to understand how it works and the specific circumstances in which it can be effective. Chapter 13 bankruptcy is a form of bankruptcy that allows individuals to create a repayment plan to catch up on past due debts, including mortgage or rent arrears, over a period of three to five years. Here's how it can potentially help with an eviction:
Automatic Stay: When you file for Chapter 13 bankruptcy, an automatic stay goes into effect. This stay prohibits creditors, including landlords, from pursuing eviction proceedings or other collection actions against you. It temporarily puts a halt to any ongoing eviction process.
Repayment Plan: In your Chapter 13 bankruptcy case, you will propose a repayment plan to the court. This plan will include a proposal to repay your rent arrears over the course of the bankruptcy plan. If the court approves your plan, you must make regular payments to a bankruptcy trustee, who will distribute the funds to your creditors, including your landlord.
Current Rent Payments: While you are in Chapter 13 bankruptcy, you must continue to make your ongoing, current rent payments to your landlord in a timely manner. Failure to do so could result in your landlord seeking relief from the automatic stay to continue the eviction process.
Compliance with the Plan: To prevent eviction and successfully complete your Chapter 13 bankruptcy, you must stay current on your repayment plan. If you miss payments or fail to comply with the plan, your landlord may seek to lift the automatic stay, and the eviction process could resume.
Was the Eviction Complaint filed before the Bankruptcy filing date?
If the landlord has not obtained a court order for possession of the rental unit, it is much easier to file a Chapter 13 Bankruptcy and force the landlord to legally reinstate the lease. In cases where there is no order for possession of the property, the Debtor can propose payment of the lease arrears over a time period of the first six (6) months of the Plan in addition to the Debtor paying the regular monthly rent payment starting the first month after the Chapter 13 Case is filed.
When the Landlord obtains an order for possession of the rental unit before the bankruptcy case is filed: If the landlord has obtained an order for possession of the property in the eviction case, then in that instance the Debtor must follow a number of procedures to notify the Court and the Landlord of the Debtor's intent to assume ( reinstate) the lease. The Debtor in this situation must also deposit rent and payment towards the arrears with the Bankruptcy Court.
The Debtor should anticipate that the landlord will file a Motion for Relief from stay if the landlord is intent upon removing the Debtor from the property. The Debtor can oppose a motion for relief from stay by following the process summarized above, and by documenting any and all instances where the landlord failed to properly terminate the lease.
An illegal lease termination can include a failure to comply with HUD requirements if the Debtor is living in a rent subsidized rental unit, or if the landlord receives special tax status through HUD for renting to low or moderate income tenants. The landlord must also be in full compliance with applicable Fair Housing Laws under state and federal laws, and follow state law to the letter as far as the requirements for eviction.
Failure to properly terminate the lease can be grounds for the Bankruptcy Court's denial of a motion for relief from stay. The landlord cannot proceed with eviction without first getting an order granting relief from the automatic stay.
In every case, the Debtor must have enough income to pay the monthly rent, the pro-rated payment of the pre-bankruptcy rental arrears and the Chapter 13 Plan payment. An experienced attorney who handles Chapter 13 bankruptcy cases is important in this process, so the Debtor can keep these expenses as low and affordable as possible.
It's important to note that Chapter 13 bankruptcy is not a long-term solution to housing issues, and it's typically used to address specific financial problems, such as catching up on past-due mortgage or rent payments. You should consult with an experienced bankruptcy attorney to evaluate your individual situation, understand your options, and determine if Chapter 13 bankruptcy is the right choice for you.
Additionally, bankruptcy laws can vary by jurisdiction, so it's essential to consult with a local attorney who is knowledgeable about the specific laws and procedures in your area.