Can Bankruptcy Stop An Eviction in California?

 

Can bankruptcy help stop an eviction? Well, it can delay it, for an extra month or two, in some cases, in some states, if you file early enough in the eviction process. Bankruptcy can, however be a great solution to the problem of "back rent debt" accumulated during the pandemic.

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Yes, bankruptcy can potentially delay or stop an eviction, but the specifics depend on whether the landlord has obtained a judgment for possession before the tenant filed for bankruptcy, and whether the eviction is due to failure to pay rent or for another reason. Here's how it works:

  1. Before a Judgment of Possession is Issued: If the tenant files for bankruptcy before the landlord gets a judgment for possession, the automatic stay of bankruptcy will typically halt the eviction process, at least temporarily. This is because the automatic stay prevents most creditors, including landlords, from continuing with collection activities.

  2. After a Judgment of Possession is Issued: If the landlord already has a judgment for possession when the tenant files for bankruptcy, the automatic stay won't stop the eviction unless the tenant can meet certain requirements. The tenant must certify that they've deposited any rent that will become due within 30 days of filing for bankruptcy with the bankruptcy court, and they must also certify that state law allows them to cure the default even after the landlord gets a judgment for possession. If the tenant does these things, they have 30 days to pay all the rent arrears and file a certification with the court.

  3. Evictions for Reasons Other than Non-Payment of Rent: Bankruptcy won't stop an eviction if the landlord is evicting the tenant for damaging the property or using controlled substances on the property.

Citations:

  • 11 U.S.C. § 362(b)(22) provides that the automatic stay does not apply to eviction proceedings where the landlord obtained a judgment of possession before the bankruptcy filing.
  • 11 U.S.C. § 362(l) allows a tenant to have the automatic stay apply to an eviction proceeding if they file an appropriate certification and make any required rent deposit.

Please note that bankruptcy and eviction laws can vary by state and can be complex.

Bankruptcy Can Get Rid of Back Rent Debt

Bankruptcy CAN be a great solution to the problem of back rent, as explained in this article on Bloomberg Law News.

The Covid-19 crisis has created a unique confluence of events where some tenants being evicted or ready to move have the unusual circumstance of owing a very large amount of back rent

That kind of debt is exactly the type of debt bankruptcy is well suited to, especially if the client is planning on moving anyway. 

Bankruptcy Can Delay Eviction, But Not Prevent It

Bankruptcy can delay eviction an extra 60 days, if you file early enough, and your state allows a right to cure. Whatever eviction rights you have come from California’s tenant law on evictions.

Timing is everything...

Each state has wildly different laws. If your state has a right to cure, bankruptcy may be able to extend it. 

How much you may be helped depends a lot on where you are in your state law eviction process, (as explained in this presentation on Eviction and Bankruptcy Remedies given by Bankruptcy Lawyers Cathy Moran, Darya Druch, and Wayne Silver to to the National Housing Law Project, an organization based in San Francisco, California.)

As they point out:

Almost all states require landlords to use legal process to evict tenants. In California it is generally done through a court process known as an “unlawful detainer.” The eviction process usually begins with a termination notice for cause (usually a monetary breach). Receipt of a termination notice is the best time to talk to a bankruptcy attorney, because at that point the tenant has the most bankruptcy options.

A bankruptcy filing prior to the expiration of the allotted time to cure in a termination notice may extend the time to cure an additional sixty (60) days under 11 U.S.C. §108.

California Eviction Resources:

Here's a handy flowchart that shows the eviction process in California

Here are some other helpful links.

Bankruptcy law doesn't add much to those protections, for the simple reason that creditors aren't interested in your lease, chances are, so a landlord can typically get relief from the "automatic stay" that puts a stop to most other kinds of debt collection.

However, consulting with an attorney knowledgeable with debt problems can still help you. It's possible that bankruptcy can be part of an overall financial survival strategy that can keep your home, for example, by wiping out other debts so you can continue to make your rent.

Doesn't the automatic stay help stop evictions? 

Bankruptcy does include something called the automatic stay which does halt collection efforts against you during your bankruptcy. And there was a time that landlords didn't know they could go into court and get "relief" from the automatic stay and proceed with an eviction in most cases. These days, judges routinely allow landlords to proceed with evictions because there is no benefit to your creditors to you maintaining your tenancy -- and the point of the bankruptcy proceeding is to divvy up what you have among your creditors.

The bottom line about bankruptcy and evictions ...

Unless you're lucky enough to live in a state or county that gives you a right to cure a rent deficiency, AND you file early enough and submit the proper paperwork to a bankruptcy court, in most cases, a judge will allow an eviction to proceed, regardless of whether you've filed for bankruptcy. In most cases, the landlord must ask the judge to "lift" the stay to allow the eviction to proceed, and in most cases, the judge will do just that.

You should see an experienced bankruptcy lawyer as early as possible to help you get the most out of this process and discuss other debt relief and asset protection options.

 

An Overview Of How Eviction Works in California

The eviction process in California, also known as "unlawful detainer," typically proceeds as follows:

  1. Notice: The process begins when the landlord provides written notice to the tenant. The type of notice depends on the reason for eviction. For unpaid rent, a 3-day notice to pay rent or quit is issued (California Civil Code § 1946 and § 1946.1). For violation of lease terms, a 3-day notice to cure or quit is given. If the tenant has been involved in illegal activities, a 3-day unconditional quit notice can be issued.

  2. Filing of Complaint: If the tenant doesn't comply with the notice, the landlord can file an unlawful detainer lawsuit in Superior Court (California Code of Civil Procedure § 1941). The tenant is served with a summons and complaint.

  3. Tenant's Answer: The tenant typically has 5 days from being served to file an answer with the court (California Code of Civil Procedure § 1167).

  4. Trial: If the tenant files an answer, the case will be set for trial, typically within 20 days (California Code of Civil Procedure § 1170.5).

  5. Judgment and Writ of Possession: If the court rules in favor of the landlord, it will issue a judgment for possession. If the tenant does not leave voluntarily, the landlord can get a Writ of Possession from the court and provide it to the sheriff, who will post a notice at the property giving the tenant 5 days to move out before the sheriff returns to forcibly remove the tenant (California Code of Civil Procedure § 712.020, § 715.010).

It's important to note that local county or city laws can add additional regulations to the eviction process. Many cities in California have rent control ordinances that provide additional protections against eviction. For example, San Francisco and Los Angeles have very specific rules regarding eviction procedures.




Jurisdictional relevance: ST

There are versions of this article for each State.



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