Can Filing for Bankruptcy Stop My Eviction?

Facing eviction is a stressful and overwhelming situation. According to the U.S. Government Accountability Office, approximately 7.8 out of every 100 renters are evicted each year. For many tenants, bankruptcy may seem like a lifeline in such situations, offering the hope of temporary relief through legal protections. But can filing for bankruptcy really stop an eviction? At Whitten & Whitten, over our years of bankruptcy experience, we’ve found that the answer depends on several factors, including the type of bankruptcy filed and the stage of the eviction process. In this post, we will explore the relationship between bankruptcy and eviction, the protections available under bankruptcy laws, and actionable advice for tenants facing eviction. 

Understanding the Relationship between Bankruptcy and Eviction

Before delving into whether bankruptcy can stop an eviction, it’s important to understand the relationship between these two legal processes. In simple terms, filing for bankruptcy means declaring to a court that you are unable to pay your debts. This automatically triggers an “automatic stay,” which halts all collection efforts by creditors. This includes eviction proceedings initiated by your landlord. However, this automatic stay is not always permanent and does not guarantee that you will be able to keep your rented property.

The Role of Chapter 7 Bankruptcy in Stopping Evictions

Chapter 7 bankruptcy, also known as liquidation or straight bankruptcy, is designed to help individuals and businesses eliminate their debts through the liquidation of assets. This type of bankruptcy can halt an eviction temporarily by triggering the automatic stay, but it does not offer a long-term solution for tenants who are behind on rent payments.

While the automatic stay may provide temporary relief from an eviction, landlords can still ask the court to lift the stay and continue with the eviction process if certain conditions are met. Furthermore, Chapter 7 bankruptcy does not discharge rental agreements, which means that tenants are still responsible for paying both past and current rent after filing for bankruptcy.

The Role of Chapter 13 Bankruptcy in Stopping Evictions

Chapter 13 bankruptcy allows people with steady income to create a plan to repay all or part of their debts over a period of three to five years. Unlike Chapter 7, Chapter 13 bankruptcy may offer a more long-term solution for tenants facing eviction.

Under Chapter 13, the automatic stay also halts eviction proceedings initiated by landlords. However, it goes a step further by allowing tenants to catch up on past-due rent payments through a repayment plan. This can provide much-needed breathing room for tenants struggling with financial difficulties and allow them to remain in their rented property.

When Bankruptcy May Not Stop an Eviction

While bankruptcy can be helpful for tenants, it is not a guaranteed solution. Here are some scenarios where bankruptcy may not fully prevent an eviction:

• Judgment for Possession: If the landlord has already secured a judgment for possession, the automatic stay may not apply.
• Ongoing Dangerous Activity: Cases involving property damage, illegal activity, or safety risks allow landlords to proceed with eviction without approval from the bankruptcy court.
• Failure to Pay Past-Due Rents: Bankruptcy does not erase responsibility for unpaid rent. Tenants who cannot bring their rent current during the automatic stay may still face eviction.

Practical Advice for Tenants Facing Eviction

If you’re facing eviction and considering bankruptcy, here are some steps to take:

1. Understand Your Legal Rights: Familiarize yourself with Indiana’s tenant laws and learn how they intersect with federal bankruptcy protections.
2. Consult a Bankruptcy Attorney: Speak with an experienced attorney who can analyze your case and guide you through the bankruptcy process. An attorney can also communicate with the landlord on your behalf to explore possible alternatives.
3. Catch Up on Rent When Possible: If you can access funds to pay overdue rent, use the breathing room provided by bankruptcy to negotiate a payment plan with your landlord.
4. Gather Documentation: If you decide to file for bankruptcy, collect all relevant documents, including your lease agreement, eviction notices, and proof of income.
5. Explore Alternative Resources: Seek financial assistance from local organizations or government programs designed to help tenants avoid eviction.

Protect Your Home and Finances with Professional Guidance

Bankruptcy can provide essential relief for tenants facing the threat of eviction, but it’s not a one-size-fits-all solution. Knowing your rights and consulting an attorney are critical steps to protect both your home and your financial future.

At Whitten & Whitten, we are skilled in helping Indiana residents explore their legal options during challenging financial times. It doesn’t matter if you’re considering Chapter 7 or Chapter 13 or simply want to understand how bankruptcy laws apply to your situation – we’re here to help. Don’t wait until it’s too late—reach out to us today. Together, we can help you find the best path forward.