Will Filing for Bankruptcy Stop Eviction from my Apartment or Rented Home?

Probably one of the biggest concerns people have about filing for bankruptcy when they talk to a Maryland bankruptcy lawyer is where they will live after the bankruptcy. This is of particular concern for those who are renting an apartment or house and are at risk for eviction. After all, if your financial picture is such that you are considering bankruptcy you certainly don’t need the added expense of looking for a new home - never mind the extra month or two of rent that landlords typically want for a deposit.

How your bankruptcy will affect your rental situation and a possible eviction depends on several factors. One of these factors is whether the landlord initiates eviction proceedings and wins a Judgment for Possession before or after you file for bankruptcy. Another is whether the landlord believes you are at risk for being unable to pay your rent in the future.

Let’s look at the options in some more detail.

Filing for Bankruptcy After Eviction Proceedings

If you are planning to file for bankruptcy for the primary purpose of stopping an eviction that has already passed the court date (known as the issuance of a “Judgment for Possession”) on your leased residence, you have limited rights. This is because in Maryland a Judgment for Possession terminates your lease subject only to “redemption” (ie; you catch up on rent or resolve the problem if you did not owe back rent). You can stay in the home if you can post at least 30 days’ rent for the month following the bankruptcy and can convince a bankruptcy judge that you ought to be able to cure the back rent, among other legal requirements. However, as a Maryland bankruptcy attorney I have also found that if you are not looking to remain in that space long term, or are unable to cure the back rent, you may want to consider other alternatives such as moving in with family members. However, a bankruptcy should still be filed if you owe significant back rent that you need to discharge, because the landlord will still be able to pursue you for that back rent (and even future rent sometimes) even if you move.

Filing for bankruptcy creates an automatic stay on all creditors and collection efforts, including stopping foreclosure on a home owned by the debtor. The automatic stay is like a big “STOP” sign to creditors. However, it is limited when applied to residential rental properties you are leasing after entry of the Judgment for Possession under an amended bankruptcy law effective October 17, 2005. The automatic stay applies for thirty days after the bankruptcy filing IF you post 30 days rent when you file, and IF you can set out your reasons to the Judge as to why you have a legal right to cure the back rent, among some other procedural requirements.

The bottom line is that the stay does not terminate immediately in this type of situation, but rather terminates in 30 days from the bankruptcy petition date unless you are able to get it extended by posting the rent and persuading the Judge that you have a right to cure, among other steps.

Prior to October 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act took effect, this was not the case. Back then the automatic stay applied to residential evictions the same way it affected foreclosure or any other covered collection efforts.

A handful of states allow an exception to this rule if the eviction is solely for non-payment of rent and not for breach of the rental agreement, because in that context the lease has not necessarily been terminated. However, very specific circumstances apply state to state, and in Maryland a judgment for possession terminates the lease subject only to redemption rights as noted earlier. Ask your bankruptcy lawyer about your circumstances in your state before filing for bankruptcy.

It bears repeating that you have a 30-day reprieve on the eviction if you can pay a month’s rent at the time of filing your bankruptcy petition and meet certain other conditions outlined above. However, this is only practical if you can pay the full past due rent within a time set by the Bankruptcy Court. If you are being evicted for another reason besides past due rent (ie; destruction to the premises, etc.), this rent cure would not cure the reason for your eviction, unless you could hire a bankruptcy attorney to convince the Judge otherwise. A valid reason for filing bankruptcy might also be to discharge the back rent, as opposed to paying it, which would allow you to “discharge” (ie, release) the debt and surrender the premises in due course to the landlord.

Filing for Bankruptcy Before Eviction Proceedings

Bottom line, if you are several months behind on rent or have other reasons to suspect your landlord may be planning to evict you, filing for bankruptcy has a good chance of successfully stalling or preventing the eviction. However, you should be careful because you still may have to show the Judge that the bankruptcy filing was in “good faith.” That means you had a valid reason to file bankruptcy, such as discharging debts or reorganizing your debts, but not simply for the sole reason of stalling a creditor from its legitimate rights.

If your landlord attempts to evict you without a prior Judgment for Possession AFTER your bankruptcy filing, the automatic stay on creditors and collection efforts applies to protect you without the 30 day rule described above. This is true even if the eviction is for a reason other than non-payment or late payment of rent. This is because without a Judgment for Possession, your lease did not terminate prior to the bankruptcy petition date. Once the bankruptcy process has started, your landlord must then get permission from the Bankruptcy Court in order to proceed with the eviction. If the Bankruptcy Court believes that “cause” exists to evict you (such as no ability to pay or cure in the future), the Judge may lift the stay and your landlord would be permitted to evict you. This is a good reason to have an experienced bankruptcy attorney representing you. An attorney can help you effectively show that eviction is detrimental to your interests and to the interests of your bankruptcy estate.

The general exception to this entire rule is if you are being evicted because of possession of drugs on the property or doing damage to the property. In such a case, the landlord can proceed with the eviction without permission of the Bankruptcy Court, providing there is no dispute over the circumstances. The landlord must certify the claim of illegal drugs on the property or damage to the property and file the certification with the Bankruptcy Court. The landlord must also serve the certification on the tenant. The tenant then has 15 days to object to the claim, in which case a hearing will be held on the matter.

Bankruptcy Trustee May Terminate Lease or Rental Agreement Even if Rent is Current

In some circumstances, such as in a “Chapter 7” case (ie; liquidation of assets case) where there is a trustee appointed, the trustee of your bankruptcy case may decide to terminate your lease or rental agreement if he/she believes doing so would be in the best interests of the estate. This is called “rejection” of the lease. In a “Chapter 11” or “Chapter 13” case (ie; reorganization case), the Bankruptcy Court may find cause to compel the debtor to reject a lease where the debtor is paying very high rent for a luxurious pent-house apartment or similar circumstances. These are Bankruptcy Code provisions that permit a debtor to reorganize or rehabilitate debts, and consequently, impose greater responsibilities on debtors to reasonably account for what they are spending. The Bankruptcy Court may decide that the debtor can easily move into a more conservative apartment and the difference between rents can be used to pay creditors. The Bankruptcy Court is permitted to do this even if you’ve never had a problem paying rent, if it would benefit the creditors in your case and make your chances of success in completing the bankruptcy more likely. However, as a Maryland bankruptcy attorney, I have rarely seen this option applied unless the debtor was a party to a lease for excessive rent, or if curing the back rent was simply impossible.

Landlords Can Request Proof of Ability to Pay Future Rent

If you intend to stay in your apartment or rented home after your bankruptcy, you are required in Chapter 11 or Chapter 13 to “assume” the lease. Assuming a lease means that you will become current with the back rent and you will continue to pay the new rent and charges as they accrue under the lease. Because you are going to continue with the lease, your landlord can ask the Bankruptcy Judge to require you to prove that you can afford to stay current on your rent going forward for the foreseeable future. If you are unable to satisfactorily demonstrate that paying rent won’t be a problem, your landlord may continue or initiate eviction proceedings once the bankruptcy is resolved. This is allowable even if you’ve never been late with rent or missed a payment. If you have a competent bankruptcy lawyer representing you, he can help you show your ability to pay future rent on a more flexible schedule or even negotiate on your behalf with the landlord to obtain better terms.

Find out more about filing for bankruptcy in Maryland

If you’re considering filing for bankruptcy to prevent an eviction or to resolve other debt issues, talk to a Maryland bankruptcy attorney first. In Maryland, call our bankruptcy lawyer’s office at 301-441-8780 to schedule an appointment. Remember, to get to the right person, ask for Danielle Chrisman, who can direct your call to the appropriate professional to meet your personal needs.

The Burns Law Firm can help you file for bankruptcy and help you protect your rights during bankruptcy proceedings and in negotiations with your creditors, to ensure the most satisfactory resolution to your Maryland bankruptcy. Remember, we are professionally licensed federal Debt Relief Agents qualified to practice bankruptcy law in United States Bankruptcy Courts in Maryland and Washington D.C. We file for individuals seeking bankruptcy protection under federal law.