Hi Folks. So as we emerge from the Covid-19 pandemic issues, rent and finding a place to live are taking center stage for many people.
The big problem here is deciding where to live, and when to move in. If you have a place that you like and are behind in rent, you need to immediately speak to your landlord about what options you have to stay there. Many jurisdictions are imposing a requirement that landlords offer payment plans to tenants that are delinquent in their rent, and your State Attorney General's office, or county/city housing authority may be great resources in this regard.
You should also look into additional resources that your jurisdiction may offer, such as rental assistance, charity rental programs, free legal aid (the local courthouse is a great resource here), or programs designed to protect renters in unusual circumstances, such as moratoriums on evictions during Winter months.
If, on the other hand, you are sufficiently behind in rent, such that living in your current residence is not feasible then you have to come up with a plan. If you plan to use Bankruptcy as a tool to eliminate the back rent, timing will be very critical here.
Let's start with some basics. Normally, the filing of a Bankruptcy stops all legal collection activity against you. We call this the “automatic stay” and it is one of the powerful tools that makes Bankruptcy very advantageous for people who are being collected against. The problem is going to be if you wait too long into the eviction process to file your Bankruptcy case.
An eviction action (also called an “unlawful detainer”) in some jurisdictions is a lawsuit that has a fast progression. It is designed to put the rightful person (in this case an aggrieved landlord) back in possession of property without too much delay. Once the eviction lawsuit has been started, if you plan to delay that process by use of the automatic stay in Bankruptcy it is critical that you file your Bankruptcy case before a judgment for eviction is entered by the court. There are a few states were there are local rules that allow someone to cure the default in rent during the Bankruptcy case, but in general if the landlord gets a judgment for eviction (aka unlawful detainer), they can move pretty quickly to complete the eviction process even if you filed for Bankruptcy relief.
Even if you file for Bankruptcy relief before the landlord gets an eviction judgment, the landlord can still move forward with the process, although it will take some time. The landlord would have to file a motion for relief from stay with the Bankruptcy court (which usually takes close to a month) and then continue with their eviction case to the point of getting a judgment. This delay in time often gives people enough time to move out of the residence before the Sheriff comes out to do a physical eviction.
Having said all of that, there is also an issue of timing as far as finding a new place to live is concerned. If you don't plan to temporarily move in with friends or relatives, and you need to find a new rental it is important to know that many (if not most) will not rent to someone who is in an active Bankruptcy case. A typical Chapter 7 Bankruptcy case will last about 3 months. A typical Ch. 13 case will last between 3 to 5 years. That means that during that period, it will be tough to convince a landlord to rent a place to you.
Legally speaking there is no justification for landlords refusing to rent to people who are in active Bankruptcy cases. This is one of the many horrible rumors that have emerged over the internet that have taken hold in the minds of people and has essentially become a practical reality. Landlords believe that if you are in an active Bankruptcy case you can skip paying them rent and eliminate that debt in your Bankruptcy even if it is incurred after the filing of the Bankruptcy case. This is totally incorrect but landlords believe it to be true and ultimately that is what counts.
For that reason, I tell my clients that if they plan to seek out a new rental, they should do so either before or after the Bankruptcy case. That means before the case is filed, or after the case is concluded. That means that if you are behind in rent and plan to move to a new rental, if Bankruptcy is part of your debt relief plan, you have to carefully consider the timing and it is very much a matter of careful planning to get the best outcome.