Evictions and the Automatic Stay in Bankruptcy

Find out how to stop or stay your pending eviction by filing for bankruptcy today.

bankruptcy and eviction blogArizona’s COVID-19 eviction moratorium was originally slated to expire on October 31, 2020. However, on September 4, 2020, the Center for Disease Control (CDC) issued a federal eviction moratorium for qualified tenants. Read on to see if you are protected by the CDC eviction moratorium, what to do if you aren’t, and if bankruptcy is a viable option for you to avoid eviction.

CDC Eviction Moratorium

The CDC enacted its own eviction moratorium as there are 43 million renters in the United States, and a sharp increase of people becoming homeless or moving into crowded living quarters could help spread coronavirus cases. As mentioned above, the CDC eviction moratorium only protects certain renters. The moratorium only protects renters who make $99,000 per year (per spouse) or less. These renters must have lost income due to the pandemic, are unable to make their rental payments, have applied for assistance and attempted to make partial rent payments, and being evicted would result in the renter living in an unsafe or cramped living environment. Tenants who lie about their circumstances, and landlords that evict despite the moratorium, can be fined as much as $100,000.

Other Resources

If you are a city of Mesa resident, you may qualify for rental and utility assistance. You will need to provide fairly extensive information regarding your income, changes due to COVID-19, rental history, and more. Contact Mesa CARES if you believe you are eligible for assistance under this program. The advantage of using this program, and similar programs, is that your rent is actually paid by rental assistance. If you are simply biding your time waiting for the eviction moratorium to expire, you will still owe all of the rent from that period, and you can be evicted when the moratorium ends. The City of Mesa is also providing grants and relief for small local businesses.

Chapter 7 Bankruptcy and How it Impacts Eviction

Evictions often come into play in Chapter 7 bankruptcies. Some filers struggle with debt, in part, because their rent at their current lease is too expensive. Chapter 7 allows debtors to break their leases without the extra fees or an eviction on their record. If the filer is using this strategy, they will need to find a new place to call home. However, some filers choose to declare bankruptcy when eviction is already imminent.  Chapter 7 bankruptcy discharges unsecured, non priority debts while protecting the filer from debt collection by creditors, and lasts about 4-6 months.

Once the bankruptcy petition has been filed (in both Chapter 7 and Chapter 13), something known as the automatic stay of protection goes into effect. The stay is effective until the case is discharged or dismissed. While the stay is active, creditors can’t garnish the debtor’s wages, repossess financed assets, or foreclose on the debtor’s mortgaged home. Utilities also can’t be shut off, and evictions are halted as well. Once the debtor has filed the bankruptcy petition, the landlord can’t start a nonpayment  eviction action or serve the debtor with eviction paperwork.

If the tenant files their bankruptcy before the landlord files an eviction, the tenant will need to catch up on rent within the 4-6 month period, or their landlord will likely just evict them after the bankruptcy is discharged. The landlord can still evict for lease violations or crimes that endanger the property and other tenants regardless of the status of the Automatic Stay. To proceed with an eviction during the bankruptcy, the landlord will need to successfully argue a Motion for Relief from the Automatic Stay.

The Automatic Stay can stop landlords from proceeding with an eviction when a bankruptcy has already been filed, but it doesn’t stop evictions that were initiated before the bankruptcy petition was filed. Prior to 2005, the Automatic Stay actually could stop an eviction that was already under way. After the Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005, the Automatic Stay lost the ability to stop active eviction proceedings.

Chapter 13 Bankruptcy and How it Impacts Eviction.

In Chapter 13, debts are reorganized into a payment plan based in part on the debtor’s income, expenses, and total debts. For debtors who make less than their state’s median income level based on their family size, the payment plan will last 3 years. For debtors who make more than that amount, the payment plan will last 5 years. Any remaining debts at the end of the payment plan will be discharged. While mortgage payments may be included in the payment plan in some jurisdictions, rental payments aren’t generally included in a Chapter 13 payment plan. However, Chapter 13 may be the better bankruptcy option for debtors who are behind on rent and wish to remain in their current unit.

Because of the length of a Chapter 13 payment plan, using it to avoid an eviction works best if the debtor plans to remain at the same residence for a while. If the debtor manages to file their petition before the eviction is filed, the past-due rent will be one of the debts included in the payment plan. This spreads the past-due rent out over 3-5 years, instead of the filer needing to come up with all the past-due rent at once. The filer also needs to remain current on rent during the bankruptcy, or the landlord may succeed with a Motion for Relief from the Automatic Stay and proceed with eviction.

If you are filing Chapter 13 to avoid an eviction, it is vital that your petition is free from any errors. If your case is dismissed and refiled too many times, your protections from the Automatic Stay could be limited to 30 days instead of 3-5 years.

Behind on Rent in Mesa?  Our Mesa Bankruptcy Attorneys Can Help

If you are behind on rent, worried about evictions, and are juggling monthly payments on other debts, there may be a better way. Call today for your free consultation with one of our expert bankruptcy attorneys. This is your no risk, no obligation to determine if bankruptcy is a good option for you, and which chapter is best for your situation. We offer our free consultations over the phone with office hours that work with your schedule, so you have no excuse not to take the first step towards a financial clean slate today!