Can Chapter 13 Bankruptcy Help Me With an Eviction?
When it comes to dealing with debts you can’t keep up with, filing for bankruptcy is usually an option of last resort. It will devastate your credit history, but it can provide you with a financial “fresh start.”
Another advantage of filing for bankruptcy is that it can help you if you’re facing an eviction for nonpayment of rent. Depending on your circumstances, the automatic stay will delay when your landlord can kick you out or might even provide you an opportunity to stop the eviction altogether.
The purpose of this blog post is to explain the different ways your eviction could play out if you file for Chapter 13 bankruptcy. But before we get to that, we need to discuss the automatic stay.
What Is an Automatic Stay?
An automatic stay is one of the most powerful features of bankruptcy. When you get a Decatur bankruptcy lawyer to file your Chapter 7 or Chapter 13 bankruptcy, you will obtain the benefit of the automatic stay.
The automatic stay will immediately go into effect after you file your bankruptcy petition. It will temporarily stop most debt collection actions by creditors, including landlords. This means that if your landlord is in the process of evicting you, the landlord must temporarily stop trying to kick you out.
The automatic stay offers filers a chance to catch their breath in a financial sense. It also offers some time so the filer can figure out what to do next. But this advantage only applies during an eviction if you file for bankruptcy before your landlord has obtained an eviction judgment.
If your landlord obtained a court judgment against you ordering you to be evicted, then the automatic stay will generally not stop the eviction process. There’s one exception to this rule.
If your eviction is the result of nonpayment of rent, then the eviction could be halted while you make up your missed payments. But it doesn’t always work out this way. That’s why if you want to file for Chapter 13 bankruptcy and might get evicted, you need to file before your landlord gets the eviction judgment.
Filing for Chapter 13 Bankruptcy Before Your Landlord Obtains an Eviction Judgment
After you file your Chapter 13 bankruptcy petition, the automatic stay goes into effect. This will stop, for the time being, your landlord’s attempts to evict you. However, your landlord may file a motion to ask the bankruptcy court to lift the automatic stay. In most cases, the court will grant the motion.
This is because whether the eviction can continue to proceed will not normally make a difference to the bankruptcy estate. In other words, if you get evicted, it’s not likely going to hinder the ability for other creditors to collect their debts from you.
In a situation where your landlord doesn’t want your Chapter 13 bankruptcy to stop the eviction process, a Chapter 13 bankruptcy will, for the most part, just delay when you get evicted.
But if you have the financial ability to make up for those missed rent payments, there’s a chance that your landlord won’t try to lift the automatic stay. In this situation, your landlord may be willing to allow your Chapter 13 bankruptcy to stop the eviction.
How a Chapter 13 Bankruptcy Can Stop an Eviction
In its most basic form, a Chapter 13 bankruptcy is a financial reorganization of the filer’s finances. Specifically, a Chapter 13 bankruptcy creates a repayment plan that spans the course of three to five years.
If you decide to file for Chapter 13 bankruptcy, you will make biweekly or monthly payments to the bankruptcy trustee. The bankruptcy trustee will then disburse that money to your creditors.
During a Chapter 13 bankruptcy, you can include your back rent in the repayment plan. So during the three to five years you’re making payments to the bankruptcy trustee, some of that money is going to your landlord to pay off your nonpayment of rent debt.
While you are making these payments, you may choose to continue living in your rental unit and your landlord will not evict you. One thing to keep in mind is that your landlord does not have to agree to this repayment plan and can choose to evict you instead. Also, your landlord can resume the eviction process if you’re unable to keep up with your repayment plan monthly payments.
If you have filed multiple bankruptcy cases in the past few years, it’s possible the automatic stay will be limited to just 30 days. There’s also a chance that there will be no automatic stay.
Another thing to consider is filing for Chapter 7 bankruptcy instead of Chapter 13. Not everyone is eligible to file for Chapter 7 bankruptcy, but one of the benefits from Chapter 7 is that it allows you to wipe out many of your debts, including back rent.
Finally, there are two major exceptions to using Chapter 13 bankruptcy to stop or delay an eviction. If there is illegal drug use on the property, or the property is endangered, then the landlord can file a certificate alleging that either of these two things is occurring. If you ignore this filing, then the landlord can continue with the eviction process.
If your landlord is willing to cooperate with the bankruptcy process and work with you, then Chapter 13 bankruptcy can potentially stop an eviction. But if your landlord wants you gone no matter what, or your eviction is for a reason other than nonpayment of rent, there’s a good chance that filing for bankruptcy won’t stop the eviction.