One of the principal changes in the new Chapter 7 bankruptcy law effects people who rent apartments. Under the old law renters on the verge of eviction could file bankruptcy to stop the eviction. The automatic stay imposed by bankruptcy filing would stop the landlord or sheriff from physically evicting tenants even after the landlord obtained a judgment of possession. Sometimes bankruptcy attorneys would serve suggestions of bankruptcy on the sheriffs department hours or minutes before the deputy would set out to evict a tenant.
The new bankruptcy law made changes in favor of residential landlords. Now, a bankruptcy stay does not stop landlords who have obtained a judgment for possession in state court. Debtors can no longer file bankruptcy after the court has ordered them to vacate their apartment and the sheriff has scheduled an eviction. This change in the law was in response to strong objections from the lobby of residential landlords who found that the cost of hiring a creditor bankruptcy attorney to get relief from the stay was higher compared to the money that they are making on any particular unit. Last minute tenant bankruptcy was particularly hard on families who own a few residential properties for investment. Family owned landlords represent themselves in state court, don’t know their way around bankruptcy court, and don’t want to pay the $150 filing fee for a motion for relief from stay.
If you rent your residence and face financial difficulty bankruptcy will provide temporary protection from eviction only if you file before the landlord gets a judgment for possession in state court.