Phoenix Bankruptcy Law News

Can a Landlord Evict a Tenant in Bankruptcy?

Evicting a tenant going through bankruptcy is a sensitive matter. Whether a tenant has filed for bankruptcy before or after an eviction judgment affects the steps a landlord must take to regain possession of the rental unit.

Here are the general rules on if and when a landlord can evict a tenant in bankruptcy:

If the Tenant Filed for Bankruptcy After an Eviction Judgment

Before 2005, a tenant could easily stop an eviction by filing for a Chapter 7 or Chapter 13 bankruptcy. Once the tenant filed for bankruptcy, an automatic stay prevented all creditors, including landlords, from pursuing the repayment of debt.

But since 2005, a landlord can evict a tenant if the landlord has obtained a court-ordered judgment for possession before the tenant filed for bankruptcy.

If the tenant is being evicted for not paying rent, some states allow the tenant to stay in the unit after an eviction judgment -- if the tenant files a certification and pays back rent and forward rent. But most states don't allow this option.

If the Tenant Filed for Bankruptcy Before an Eviction Judgment

If a tenant doesn't pay rent or violates a term in the rental agreement, the automatic stay given by the tenant's bankruptcy will prevent the landlord from starting the eviction process.

Instead of handing the tenant a termination notice, the landlord can still try to proceed with the eviction by asking the federal bankruptcy court to lift the automatic stay.

In most cases, the judge will lift the stay because a lease agreement usually doesn't affect the value of a tenant's estate.

If the Tenant Isn't Behind on Rent or Violating Lease

A bankruptcy can affect a tenancy even if the tenant is on time with rent and hasn't violated the rental agreement. This is because the bankruptcy trustee has to decide whether to continue or terminate the lease or rental agreement.

Usually, the trustee will let the tenant keep the rental unit. But if the tenant filing for bankruptcy lives like an A-lister who pays a ridiculous rent when there are plenty of modest rentals available, the trustee might pull the plug on the lease and make the tenant find a new home.

A landlord can't ask the bankruptcy court to demand that the tenant show proof of his ability to pay future rent. If the tenant later becomes unable to pay the rent, you can ask the bankruptcy court to lift the automatic stay so that you can terminate the lease and, if necessary, evict the tenant.

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