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What Is A Landlord To Do When a Tenant Files Bankruptcy

Categories: Bankruptcy Law Overview, Chapter 13, Chapter 7

As the economy continues to lag, many renters are creating more problems for landlords when they cannot pay their rent.  The duties imposed on a landlord are stringent enough, but what is a landlord to do when the tenant they want to evict files for bankruptcy protection?  The American Bar Association provides this publication that provides some important details. Here are some important points to remember:

The Automatic Stay

11 U.S.C. Section 362 requires that a landlord cease all efforts to collect rent and/or evict a tenant upon the filing of a bankruptcy case. This means that the moment the landlord knows of a tenant’s bankruptcy case, they MUST stop the eviction process until the case is concluded, or the court grants the landlord relief to proceed with their eviction.

Past Due Rents

When a tenant files for bankruptcy, any rents due prior to the bankruptcy case have the potential of being discharged.  This means that a landlord must be very careful when seeking past due rent after a bankruptcy case has been commenced.  Depending upon the type of bankruptcy case filed, the landlord may recoup past rent.  A consultation with a bankruptcy lawyer will keep the landlord informed of the current laws and help them moving forward.

Timing is Key

It is extremely important to take proactive steps quickly by hiring a bankruptcy attorney to help with seeking an order from the bankruptcy court that allows the landlord to continue with their eviction proceedings or unlawful detainer cases. It’s just a good business decision to work with your landlord tenant attorney and bankruptcy lawyer to navigate the dangerous waters where the tenant has many rights.

In bankruptcy proceedings, tenants obtain rights they would not otherwise have, rights that come at the expense of landlords, including certain rights landlords normally enjoy under state law. Acting before a bankruptcy filing occurs is the ideal scenario. But if that ship has sailed, acting quickly when a bankruptcy does occur is the next best thing. Prompt action allows landlords to help enforce their rights to receive current rent, to protect against an unwanted assumption or assignment, or when acting pre-bankruptcy, to evict the tenant.

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