In California, filing for bankruptcy in certain instances may prevent a tenant from being evicted. Bankruptcy is a means by which people can discard debt or make a plan to repay debts to creditors. Filing a petition for bankruptcy will not always protect a tenant from eviction, so it is important to understand the possible consequences of using a measure as drastic as bankruptcy to stay an eviction. If you require assistance determining whether filing bankruptcy is the right choice when facing eviction, contact the Roseville Chapter 13 bankruptcy attorneys at The Bankruptcy Group today.
Types of Bankruptcy in CA
Chapter 7 bankruptcy allows for the debtor to liquidate his or her assets and use the money from that liquidation to pay off creditors. Under Chapter 7 a debtor will likely receive a rapid discharge of certain debts, although not without experiencing consequences such as a poor credit score.
Chapter 7 bankruptcy is rarely the most helpful option for an individual who wants to avoid eviction in California. Chapter 13 bankruptcy is generally more beneficial to a tenant who is trying to avoid being evicted.
Chapter 13 bankruptcy is geared towards debtors who have a regular source of income, and compared to Chapter 7, allows greater opportunity to possibly retain an asset like their home. A debtor in a Chapter 13 bankruptcy proposes a plan to creditors to repay their debts over a period of time, usually three to five years. As long the bankruptcy court approves the plan, a debtor can keep their home and make payments based on their anticipated income over the duration of the repayment plan. However, it is critical to adhere to the plan and stay current on all payments.
Unlike Chapter 7, Chapter 13 bankruptcy does not allow for debtors to immediately discharge their debts a few months after filing for bankruptcy.
Can Filing Bankruptcy Help Renters with Eviction?
If a landlord properly gives a tenant the required notice to vacate a property after the expiration of the lease and the tenant does not comply, a landlord can move to evict the tenant. To begin eviction proceedings in California, a landlord must file an unlawful detainer lawsuit in superior court.
If a tenant files for bankruptcy while an unlawful detainer lawsuit is pending, they are generally entitled to an immediate automatic stay, or delay of the pending action. An automatic stay is generally imposed against certain creditors, like the landlord, who want to start an action against a debtor or the debtor’s property.
Once an automatic stay has been imposed on the tenant’s creditors, it will halt proceedings for an eviction and allow the tenant to remain in their home. If a tenant can file for bankruptcy prior to the landlord commencing an unlawful detainer lawsuit the automatic stay would generally operate to prevent the landlord from filing the action altogether.
Limitations of the Automatic Stay
While a tenant’s filing of bankruptcy may hinder eviction proceedings, there are a few options a landlord could take to ignore the automatic stay and continue the eviction proceedings. For example, a landlord may request relief from an automatic stay and the bankruptcy court may lift the automatic stay if the landlord can show that he or she is entitled to such relief.
The automatic stay would not prevent a landlord from enforcing a judgment obtained prior to the tenant petitioning for bankruptcy. Additionally, a tenant cannot be protected by an automatic stay if the landlord’s eviction action is based on the tenant doing harm to the rental property, or the tenant using illegal controlled substances on the property.
A bankruptcy case can also be dismissed for various reasons, such as the tenant filing in bad faith or neglecting to pay fees, which would remove any delays or protections associated with the automatic stay (or a repayment plan in Chapter 13).
Depending on these and other factors, a timely filing of bankruptcy can potentially halt eviction proceedings in California. However, filing for bankruptcy may not always have the desired effect a person may want. There are other options a landlord may take to continue eviction proceedings which would leave a tenant in a tight spot. Even if a landlord could not get the bankruptcy court to overturn the filing and continue the eviction, the automatic stay granted by filing for bankruptcy will eventually lapse and the tenant would have to continue to fight the eviction.
While filing for Chapter 13 bankruptcy may be the best choice for an individual who seeks to keep their home, it is not without its pitfalls. A debtor who files for Chapter 13 bankruptcy must have a regular income, sufficient income to pay off their unpaid debts, and sufficient income to continue paying future mortgage payments.
Roseville Bankruptcy Attorneys for Homeowners and Renters Facing Eviction or Foreclosure
This is a lot for a person to think about when facing an eviction and likely dealing with other issues in their lives as well. This is where The Bankruptcy Group can help you. The Bankruptcy Group have a staff of experienced attorneys and legal professionals who have spent years working in the field of bankruptcy and real estate to get favorable results for their clients.
Before you make a decision as difficult as filing for bankruptcy, take the time to consult with our legal professionals. Contact our Roseville bankruptcy lawyers today at (800) 920-5351 for a free consultation.