Eviction Issues in Chapter 7
Chapter 7 cases are often filed to stay eviction proceedings. A few general observations about how the automatic affects eviction might be useful. But also useful is the admonition to check with your local attorney. Eviction law is very state specific, so tread carefully.
Chapter 7 Filed AFTER Judgment/Property Endangerment
The Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) enacted in 2005 made substantial changes in how he automatic stay affects eviction. Essentially, there are two situations in which a landlord can evict a tenant in Chapter 7 with impunity: (1) if the landlord has a state court judgment awarding possession, then the automatic stay does not stop the eviction; and (2) where the basis for the eviction is use of controlled substances on the property or other endangerment of the property. The former circumstance is simple: either you have a judgment or you don’t. The latter situation is, however, move problematic. The landlord may initiate this procedure by filing and serving a certification that (1) an eviction action based on property endangerment or controlled substance use was already filed in state court, or that (2) you have engaged in activity involving drugs on the property or otherwise endangered it within the last 30 days. The landlord may thereafter proceed with the eviction unless you file and serve an objection within 15 days. The court will then set the matter for hearing.
Chapter 7 Filed PRIOR to Entry of Judgment, No Property Endangerment
The more common situation is where a tenant files Chapter 7 before the landlord has obtained a judgment for possession, and there is no illegal drug use or property endangerment alleged. Here are the likely scenarios:
LEASE HAS TERMINATED PRIOR TO FILING CHAPTER 7
If the lease has been terminated prior to the filing of the Chapter 7, pursuant to its terms and applicable state law, then it cannot be reinstated except by agreement. The issue is typically whether the lease was properly terminated.
LEASE WAS NOT TERMINATED PRIOR TO FILING CHAPTER 7
If the lease has not terminated prior to bankruptcy, debtor (or more correctly, trustee in Chapter 7) has the following options:
Do nothing, and after sixty days, the lease is deemed rejected.
File a notice of intent to assume the lease and cure any pre-petition defaults. This notice must be filed and served within sixty (60) days of case filing. I cannot recall an instance where I, as trustee, have assumed a lease, but it could certainly happen. I just haven’t come across a case where a particular lease had value.
In order to assume a lease, the debtor/tenant must also propose to cure the pre-petition default upon reasonable terms and conditions.
Once again, I would suggest talking to your attorney about any landlord-tenant issue in bankruptcy. It can get a little complicated.