I'm Evicting My Tenant For Non-Payment
What If He Files Bankruptcy?
Practical insights from powerhouse attorney, author and speaker Bradley Bailyn.
You had a tenant that wasn’t paying his rent, so you went to court and commenced eviction proceedings against him. If you are in the New York City housing courts, you probably know, or certainly have become aware, that this could be a long drawn out process to remove the tenant from your premises, and lots of luck trying to recover the full amount of rent due you. (It is possible, but city housing judges can be rather generous with your money).
On top of the usual difficulties, what happens if the tenant files for bankruptcy? How does that effect your eviction?
The answer, as usual, is, it depends.
If you have already obtained a judgment and warrant of eviction against the tenant, you are in a much better position, than if the proceeding is still pending, and there hasn’t been a final determination.
In bankruptcy, once filed, an “automatic stay” is granted which halts all legal proceedings against the filing debtor. However, in the case of a landlord tenant matter, where the landlord has already obtained a judgment of eviction, that stay is not automatic.
Official Bankruptcy Form 101 A deals with the issue when the landlord has obtained a judgment of eviction against the tenant. The tenant must certify that he/she has the right to remain on the premises if he/ she pays the full amount due the landlord, (not in the case where a warrant has issued—too late,) and that the tenant has given the clerk a deposit of 30 days rent after filing the petition.
Under the above circumstances, a tenant will be given an automatic 30 day stay after filing the petition. The landlord, you, must be served with a copy of this form. If the tenant seeks a stay for more than those 30 days, he must file another form with the court, pay the landlord the total amount due within the first 30 day stay period, and serve the landlord with that other form which is a 101 B form.
In the event the tenant files a petition in bankruptcy prior to the landlord obtaining a judgment, an automatic stay goes into effect, essentially preventing the continuation of the eviction. However, the landlord does have the right to affirmatively petition the bankruptcy court for relief from the automatic stay.
If this is the situation you find yourself in, it would be a mistake, and likely a very costly mistake to represent yourself in such a proceeding.
Since the lease is an obligation, and not an asset of the bankruptcy estate, its existence does not benefit potential creditors of the estate, and has little effect on the proceeding as a whole. Further, bankruptcy court judges are not unaware of the burden that an automatic stay places on the landlord who has not yet obtained a judgment of eviction.
Often, the bankruptcy court will lift the stay, if a proper argument is made, and allow the eviction proceedings to continue.
If you find yourself facing a situation where the tenant you are evicting has filed for bankruptcy, whether before or after you have obtained a judgment of eviction, these are waters you do not want to cross without the benefit and protection of an experienced debtor-creditor attorney.
You should “lawyer up” immediately. The time and money you save will be your own.