Stay Of Residential Evictions Under New Bankruptcy Law

I received the following email from a landlord (creditor) concerning a tenant who filed bankruptcy on the eve of eviction.

I got my final judgment for possession count 1 only Sept. 4 my tenant went to file bankruptcy September 5 to avoid the eviction. I got a call from the West Palm sheriff telling me there was a stay on them serving him the 24 hour they were to do that day Sept. 5. I was in disbelief that this guy could not pay rent just because he was now protected because of this bankrupt.

Under the facts presented the bankruptcy probably will not stop the eviction.

The new bankruptcy law made it much harder for a tenant who has not paid rent to stop an eviction by filing Chapter 7 bankruptcy. In many cases residential evictions are an exception from the bankruptcy stay. The general rule under the new law is that the eviction of a debtor from his residence is not stayed by bankruptcy is the lessor has obtained a judgment for possession prior to the bankruptcy filing. There are exceptions. The stay exception (no stay applies) is limited to actions seeking possession of the property or to exert control over the property. A landlord’s action to seeking a money judgment against the debtor is stayed by bankruptcy. Also, notwithstanding the general stay exception, a debtor may obtain a automatic 30 day stay by filing a “certification” that the debtor has a right to cure the monetary default under the lease and the debtor has deposited past due rent with the bankruptcy court.

Residential evictions are complicated under the new bankruptcy law. Landlords should make sure their real estate attorneys understand and fully explain the new law so they do not inadvertently violate a bankruptcy stay.