Now that we are starting to see eviction moratoriums end, I thought this was a good time to discuss how a bankruptcy can be used to gain more time if needed especially for higher wage earners that haven’t found employment yet – perhaps technology has displaced their jobs for instance. All the help wanted signs out there are usually for food service, hospitality industry jobs — not necessarily all jobs.
Tenants of single-family homes financed by the federal government are still protected through September 30. For all others, landlords must still comply with the rules as they existed prior to the pandemic.
There are various government websites which may have emergency rental assistance – at treasury.gov search for “find rental assistance” and select your state and county. Here is a link as well.
The Consumer Financial Protection Bureau also released a tool last week to help renters find and apply for payment assistance for rent, utilities and other assistance.
For all others, as with most things, waiting too long can hurt. While the moratorium eliminated most evictions, it did not cancel rent. Bankruptcy can be a good program to allow for time to catch up on past due rent. The key is to file BEFORE an eviction judgment is entered.
The last major amendment to the Bankruptcy Code about 16 years ago (BAPCPA), included an amendment to the automatic stay; in residential evictions, where the landlord has a judgment granting them possession prior to the filing of the bankruptcy, there is no automatic stay as to that order. People tend to wait until all hell has already broken loose, and in residential evictions, that means they went to court and lost, or did nothing and got a default judgment entered against them. Now, if you file before any order for possession or similar order is entered, the stay still works. See 11 USC 362(b)(22).
As bankruptcy attorneys, the pitfall we often see, is assuming you file before the judgment, is feasibility. Case law says the cure must be “prompt”. Most cases hold that the meaning of “prompt” as 3-6 months. Depending on how large the default is,–paying back past due rent arrears in 3-6 months, while still paying secured creditors and attorney fees can be difficult. You also have to pay your current rent known as post-petition rent. It’s possible that a negotiated time frame to repay can be agreed upon as well, payable in a Chapter 13 Plan. Rents are on the rise, so agreeing to a higher rate, and even outside-the-box thinking like offering to do an improvement that is within your skill set may encourage a landlord to agree to a longer time frame to catch up. Landlords are people too and many understand the current situation and want to help, but they have bills to pay also.
So unless you have a plan and an ability to promptly catch up your past due rent, a bankruptcy is often a way to start fresh — and to receive a discharge of the unpaid rent. Of course, you’ll have to move and find a new place to live, but this can give you some additional breathing room to do this.
The type of lease you have also matters. If you are month to month for instance, the landlord can still evict you even if you intend to pay the back rent. You would have to get the landlord’s agreement in advance to extend the rental period in writing and assume the lease in the Chapter 13 bankruptcy and pay the back rent.