There are many circumstances in which landlords become involved in the bankruptcy process. This blog will not deal with landlords filing a bankruptcy petition as debtor. We will discuss what happens when a tenant files bankruptcy and what to do.
A tenant facing eviction may file a bankruptcy petition. Most common is that the eviction case has been filed and there is a trial date pending. The tenant will file a bankruptcy petition. That will cause the eviction court to dismiss the eviction case.
What happens next depends on what kind of bankruptcy is filed. If the tenant files a Chapter 7 petition, then the landlord would file a motion in bankruptcy court to vacate the automatic stay. Once that motion is granted, the landlord would file a motion in the eviction court to reinstate the eviction case, and attaching the vacate order. Once the eviction case is reinstated, then the court will reschedule the eviction trial. Please note that the landlord will only obtain possession of the leased premises. It is likely that the rent debt will be discharged in the bankruptcy case.
It is also possible that the tenant could file a Chapter 13 or small business Chapter 11 bankruptcy. In either case, the tenant must propose a plan to repay the landlord in full. If the plan is not approved or if the tenant misses a plan payment, then the landlord can move to vacate the automatic stay. The tenant may alternatively decide to convert the Chapter 13 or Chapter 11 to a Chapter 7 case. In that event, the landlord would file the motion to vacate stay in bankruptcy court. It is most important to remember that the filing of bankruptcy stops any pending or intended legal action to remove the tenant or to collect back rent, and always requires the filing of a stay motion.
Please call us today for your bankruptcy issues.
