Bankruptcy and Residential Eviction

Even the simplest eviction can be an expensive, time consuming and draining endeavor for a landlord….but what happens when a tenant files for bankruptcy?

As it turns out, timing is everything. If a landlord has obtained a judgement for a writ of execution before the tenant filed for bankruptcy, the landlord can proceed with the physical eviction without violating the automatic bankruptcy stay. Pursuant to 11 USC 362(b)(22), the bankruptcy automatic stay will not stop the physical eviction.

However, a determined tenant can frustrate the eviction process further. Per 11 USC 362(I), a tenant may file a “certificate” to stop execution of the writ if: 1) the eviction is based on a failure to pay rent and 2) the tenant certifies (under penalty of perjury and filed with the court) that the monetary default will be cured within a 30-day period from filing the bankruptcy petition and deposits with the clerk of the court any future rent that would become due during the 30-day period after the filing of the bankruptcy petition. If a tenant proceeds down this road, a landlord may file an objection to the certificate and the bankruptcy court must hold a hearing within 10 days to determine the truth of the certificate. If the certificate is determined to be false, the bankruptcy court will lift the automatic stay and the eviction process can resume.

The certificate process is only available to tenants in cases of failure to pay rent, not in other cases of violating provisions of the lease. Notably, if illegal activity or damage to the property is the reason for the eviction, no hearing is needed and the eviction process can continue if a landlord files a certificate with the bankruptcy court stating that the tenant actions are endangered the property.

In the event that the tenant files for bankruptcy prior to a judgment for eviction, the bankruptcy automatic stay provisions will protect the tenant. In those instances, a landlord will need to petition on the bankruptcy court for an order to lift or remove the automatic stay before the eviction process can continue.

As always, feel free to reach out to the attorneys at Holmquist & Gardiner, PLLC with any questions on this issue or other landlord tenant laws.