Stop Eviction with Bankruptcy

You’re probably here because the possibility of eviction is looming. It’s a scary situation, and you’re likely feeling overwhelmed. You might have heard that bankruptcy can stop eviction proceedings. Let’s unravel how that works and give you the information to approach this challenging situation.

Understanding the Automatic Stay

Here’s some good news—at least initially: Filing for bankruptcy triggers something called an “automatic stay” under 11 U.S. Code § 362. This legal action acts like a shield against most creditors, including a landlord trying to evict you. From the moment you file for bankruptcy, the automatic stay kicks in, providing immediate but often temporary protection from eviction.

Can Bankruptcy Stop Eviction Proceedings Entirely?

You might hope bankruptcy is a magic wand to make rent debt vanish, thus ending the eviction threat. While a Chapter 13 bankruptcy might help you manage past-due rent, it usually doesn’t erase the possibility of eviction. It usually only pauses things. To understand why requires knowing how eviction works.

The Relationship Between Eviction and Bankruptcy

Think of bankruptcy and eviction like two separate trains on parallel tracks. A landlord usually has to get a court judgment for eviction before they can legally remove you from the property. If your landlord secured an eviction judgment before your bankruptcy filing, the train’s already left the station, and bankruptcy, in that case, likely can’t help.

Filing Before the Eviction Judgment

Filing bankruptcy before the eviction judgment is ideal, buying you time to get your finances in order. That’s where the power of the automatic stay shines, as it prevents creditors from taking further action against you. It can offer some breathing room as you explore your legal options and create a plan to address your debts.

What About Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, which involves liquidating assets to pay off debts, works differently. This often provides a briefer pause to the eviction process. Because these cases usually wrap up within months, it’s a short-term reprieve, and you’ll still need to address the underlying rent issues to avoid future legal action.

Will My Landlord Fight the Bankruptcy Stay?

Landlords are savvy; they’re running a business, after all. Here’s the likely scenario: your landlord will likely head to bankruptcy court, requesting the automatic stay be lifted so the eviction can continue. They usually win unless there are special circumstances, such as if the landlord violated the lease terms, or you can demonstrate that you are making efforts to repay the debt.

Limited Protection Against Eviction

Bankruptcy isn’t a fail-safe way to avoid your responsibilities as a tenant. Rent payments are essential, both before and during a bankruptcy case, to demonstrate your good faith and commitment to resolving the situation.

Staying Current With Rent

Staying current with your rent throughout the process is critical for your best chance of remaining in your home. Bankruptcy, particularly Chapter 13 bankruptcy, offers a structured way to address the financial hardships making rent difficult. If your situation makes that challenging, talking with your landlord directly, proposing a payment plan, or exploring options like loan assistance or government programs might offer additional paths to keep your housing.

How Chapter 13 Could Work

While a Chapter 13 bankruptcy doesn’t guarantee you keep the rental, it allows for the creation of a court-approved plan. This repayment strategy includes ways to handle debts over 3 to 5 years, giving you time to catch up on missed rent payments and potentially save your home from foreclosure. Working with your bankruptcy attorney becomes critical to ensure this plan aligns with both your financial realities and your goal of remaining housed.

Protecting Your Credit After Eviction

A common question is whether bankruptcy can wipe an eviction from your record. The short answer is no. While bankruptcy may help to alleviate debt, an eviction on your credit report is there for up to 7 years, making it hard to secure housing in the future. Taking proactive steps can lessen the sting, however: paying the outstanding balance (if possible), writing a letter explaining the eviction to potential landlords, and demonstrating financial stability all work in your favor when searching for a new home.

Can You Stop An Eviction With Bankruptcy?

Facing eviction is a stressful experience, but bankruptcy may be able to help you temporarily stop the process, or even permanently stop eviction in some cases. If you are behind on your rent payments and facing eviction, filing for Chapter 7 or Chapter 13 bankruptcy could prevent you from losing your home. When you file for bankruptcy, the court will issue an “automatic stay,” which will protect you from your creditors and put a pause on your landlord’s attempts to evict you for rent arrears.

How Can Chapter 7 or 13 Bankruptcy Help Me Avoid Eviction?

When you file for Chapter 7 or Chapter 13 bankruptcy, you are protected under the bankruptcy code’s automatic stay provision. According to 11 U.S. Code § 362, this automatic stay immediately goes into effect as soon as you file, which is intended to provide bankruptcy filers with temporary relief from creditors. This means that your landlord will have to stop any eviction efforts immediately, buying you time to reorganize your finances. This protection is in place to allow time to create a plan to address your debt.

Chapter 13 may help you make up missed rent payments through a three-to-five-year repayment plan, but you will have to continue making on-time rent payments throughout the course of the bankruptcy. Because it stops debt collection activity, Chapter 7 can temporarily halt an eviction while providing a window to resolve lease issues or locate new housing.

What are the Limits of the Automatic Stay?

If you file bankruptcy after an eviction judgment, the automatic stay, unfortunately, will not protect you from eviction actions. You must file for bankruptcy protection before an eviction judgment is filed in civil court to benefit from its protection. If the automatic stay is successfully applied to your case, your landlord can file a motion for relief from the automatic stay to proceed with an eviction. To oppose this motion, you will need to prove that you filed your bankruptcy case in good faith, you are actively working to address missed payments, or that your landlord is attempting to evict you for an illegal reason, such as retaliation for reporting a housing code violation.

If Filing Bankruptcy Stops Eviction Proceedings, What About My Credit?

It is understandable to be concerned about the impact bankruptcy could have on your credit, especially if you are facing eviction. While both bankruptcy and eviction negatively impact credit, the extent and duration vary. Bankruptcy typically has a more severe initial impact but can be a path toward debt relief and financial rebuilding by eliminating certain debts. On the other hand, eviction can make securing new housing particularly difficult, especially if you have a history of missed payments or other lease violations. Openly addressing the eviction with potential landlords, providing evidence of efforts to resolve the issue (such as through bankruptcy), and showcasing improved financial habits can help mitigate the credit damage. By demonstrating a commitment to positive financial change, individuals can work towards rebuilding their credit over time.

FAQs About Bankruptcy Stop Eviction

Here are some frequently asked questions about how the bankruptcy process works when facing possible eviction:

Conclusion

Understanding the intersection of bankruptcy and eviction is vital for anyone facing financial hardship. While bankruptcy won’t automatically stop eviction proceedings in every case, it’s a powerful tool that can offer temporary protection from creditors and provide an opportunity to address financial difficulties. It’s essential to consult with an experienced bankruptcy attorney to discuss your specific circumstances and determine the best course of action. By taking proactive measures, you can face a challenging situation head-on and work towards the most positive outcome possible.