Can Bankruptcy Stop Eviction?

If you’re behind on your rent, you may be wondering what options you have to stop your landlord from evicting you. Filing bankruptcy is one option to consider. When you file a bankruptcy case, eviction and all other debt collection activities must stop temporarily. But filing bankruptcy may not be the best way to stop an eviction permanently. 

To help you decide if this path is right for you, we’ll take a look at how filing bankruptcy can temporarily stop an eviction, the limitations of using bankruptcy to stop an eviction, and the different ways filing bankruptcy can help you if you’re facing eviction.

How Does Eviction Work?

State laws, not the U.S. Bankruptcy Code, control how evictions happen. This means the exact eviction process depends on where you live. But generally speaking, an eviction starts when a landlord sends an eviction notice to a tenant. Though there are some exceptions, the tenant usually has an opportunity to avoid eviction by addressing the reason for the eviction. Because many evictions are due to unpaid rent, the eviction notice may give the tenant a short time to pay the past-due rent and avoid the eviction. This will depend on your rental agreement and state laws.

If the tenant can’t remedy the problem, the landlord can file an eviction lawsuit in state court. The court then schedules a hearing or trial date for the eviction case, and you’ll receive notice of this hearing. Some states require you to present any defenses to the eviction before this hearing date. But many states let you make your defense at the hearing.

After the hearing, the judge in the case decides whether to evict you. If they side with the landlord, they’ll issue a judgment granting the landlord’s request for eviction and order you to move out. Filing bankruptcy is most effective in stopping an eviction if it’s filed before the landlord gets an eviction judgment.

Bankruptcy and Eviction: How Filing Can Stop an Eviction

An automatic stay goes into effect as soon as you file either Chapter 7 or Chapter 13 bankruptcy. It temporarily stops all debt collection activity, including eviction actions, as long as the landlord hasn’t already received a judgment in their favor. 

But the automatic stay isn’t a permanent solution. It’s a temporary measure to keep creditors at bay during the bankruptcy process. What happens next depends on which type of bankruptcy you file. 

Can Chapter 7 Bankruptcy Stop an Eviction?

If you file Chapter 7 bankruptcy and you’re being evicted for the nonpayment of rent, you’re often just buying yourself some time to find a new place to live. Many states don’t allow renters who are facing eviction for nonpayment of rent to stay in their current rental by catching up on past rent payments. If your state does allow this and you want to stay in your current rental, you’ll need to repay all of your unpaid rent plus any late fees and penalties within 30 days of filing bankruptcy. 

This isn’t easy for most people. After all, if you had that money readily available, you probably wouldn’t be filing bankruptcy. 

The bottom line is that it’s difficult to permanently stop an eviction with Chapter 7 bankruptcy. That’s because people file Chapter 7 to get rid of and walk away from their debts. To walk away from past-due rent, you usually have to find a new place to live. 

Can Filing Chapter 13 Stop an Eviction?

Chapter 13 bankruptcy may be a better option for filers who want to catch up on past-due rent and stay in their current rental. But there’s a big catch: The landlord has to agree to allow you to catch up on your past rent (and fees) as part of your Chapter 13 repayment plan. 

These plans allow filers to catch up on past-due debts, and they typically take three to five years. During that time, you’re required to make monthly payments to the bankruptcy trustee who then distributes money to your creditors, including the landlord. During this time you’d also need to make your monthly rent payments as they come due.

Landlords often don’t agree to Chapter 13 repayment plans. But they may agree to yours if they want to recover unpaid rent and continue receiving rent as it comes due, and they believe you’re able to make the repayments.

Limitations on Using Bankruptcy To Stop an Eviction

We’ve covered one of the first limitations of using bankruptcy to stop an eviction: The automatic stay is temporary. But there are several other drawbacks as well. 

First, the automatic stay won’t stop the eviction process if the landlord already has an eviction judgment against you. One exception to this is if the eviction is due to the nonpayment of rent and the tenant is in a state that allows tenants to avoid eviction by catching up on past-due rent.

Second, the landlord can file a motion to lift the automatic stay. The bankruptcy court will often grant these motions because doing so doesn’t hurt the bankruptcy estate. In other words, it doesn’t affect money available to other creditors.

Third, it’s easier for a landlord to proceed with evictions due to illegal drug use or the tenant endangering the rental property. If the landlord files a certificate alleging either of these situations, the tenant then has 15 days to respond. If the tenant is unsuccessful in contesting the allegations, then the landlord can continue with their eviction action. So if you’re being evicted for either of these reasons, don’t expect the automatic stay to stop the eviction proceeding for long unless you have legitimate defenses to your landlord’s eviction allegations.

Fourth, if you recently filed a bankruptcy case and it was dismissed, the automatic stay may be in effect for only 30 days or not at all.

How Bankruptcy Can Help You if You’re Being Evicted

It’s usually not a good idea to file bankruptcy for the sole purpose of stopping an eviction. But if you’re facing other serious financial challenges and you want to continue living in your rental, bankruptcy may help make that possible. Incorporating unpaid rent into a Chapter 13 payment plan is often the best way to do this. Instead of having to pay all your back rent at once, you get to pay in manageable monthly payments through the bankruptcy trustee.

If you have a good relationship with your landlord, you can try talking to them. Specifically, you can ask them to stop the eviction action against you and see if they’re willing to discuss a rent repayment agreement. 

If you just need a little bit more time to find a new place to live, make sure that filing bankruptcy makes sense with your financial goals. Remember: there are rules about how frequently you can file bankruptcy. To see if bankruptcy is a good option for you, you can schedule a free consultation with a credit counselor or bankruptcy lawyer. An attorney can give you legal advice about how to handle your eviction and what approach to take when filing bankruptcy.

Let’s Summarize…

Through the use of the automatic stay, filing bankruptcy can slow down a landlord’s attempt to evict you. Even though the benefits of the bankruptcy automatic stay are temporary, it can give you precious time to figure out what to do next. For example, you can use that time to find a new place to live or make arrangements to pay back unpaid rent. You can make these arrangements through the Chapter 13 bankruptcy process, under state law, or through direct negotiations with your landlord.