Bankruptcy and Eviction
With the rate of evictions on the rise in recent months and the expectations that eviction numbers will grow, it’s important to understand the role eviction plays in bankruptcy. If you file for bankruptcy before an eviction can it stop the eviction? And if you are evicted and you file, is the eviction eliminated from your debts?
Here’s what you need to know.
Most evicted people owe their landlord money. If their rent was current the eviction probably wouldn’t have occurred. It’s possible to break a lease in other ways, but more often than not it’s due to rent non-payment or it’s another issue but rent is also behind. Landlords are often willing to overlook other infractions when they are getting their money on time every month.
How Does This Affect Bankruptcy?
Rent is an unsecured debt. There’s nothing your landlord can recoup for the debt. You don’t own the property and rent isn’t court-ordered, which makes rent unsecured. Chapter 7 bankruptcy discharges rent debts. Chapter 13 builds them into the repayment plan.
One of these two things occurs regardless of whether:
- Your landlord has filed a lawsuit against you
- There was no action but you’re behind and at risk for eviction
- The court has issued a judgment against you related to your rent
This doesn’t mean the eviction won’t be on your credit. It will and future landlords can see that you were evicted. And it doesn’t mean that you’ll have the option of continuing to live where you’re living. But filing for bankruptcy results in a discharge and you’re no longer obligated to repay what you owe.
It’s also important to note that the discharge rule regarding rentals doesn’t apply to all debts. For example, if you’ve accumulated debt related to damaging the property, the landlord can take legal action against you to recoup damages. Many don’t, but you should keep it in mind and avoid damaging the property before leaving, even if you are upset about getting evicted.
Should I File for Bankruptcy If I’m About to Be Evicted?
If the court has yet to issue a judgment for possession, there might be time to stop the eviction by filing. In some cases, you can avoid eviction by catching up on your overdue rent within 30 days. Of course, this isn’t always possible. Filing for bankruptcy might help you free up money going toward other debts to pay toward your rent, so it’s worth considering.
If things haven’t gone that far, bankruptcy puts a temporary hold on eviction proceedings. Your landlord can still file a motion in court asking the court to lift the automatic stay. However, the stay at least buys you time to figure out what to do next.
Speak to a Bankruptcy Attorney If You are Concerned About Eviction
Filing for bankruptcy can be a valuable tool for dealing with financial problems that affect your living arrangements. Just as filing can help you avoid foreclosure on your home, it might be able to help you avoid or postpone the eviction. A few extra weeks can be a blessing if you are making important financial decisions and face the threat of not being able to live in your home.