Can Bankruptcy Stop an Eviction?

Eviction, Bankruptcy and You

A tenant being evicted from their residence used to have the option of filing bankruptcy to stop the eviction and remain in their dwelling.  Filing bankruptcy allowed the tenant to try and work things out with the landlord or at the least allow them more time to find another place to live.  However, since October 2005 when the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) became law filing bankruptcy no longer provides that protection.

The eviction process in Ohio typically begins when a landlord posts a “Notice to Leave Premises”, commonly referred to as the Three-Day Notice on the tenants premises.  If the tenant does not leave the property after this notice is posted, the landlord will file a complaint in state court asking for the tenant to be removed from the property.  Eviction hearings in Ohio are typically expedited.  If the tenant does not have a valid defense to the landlord’s complaint the court will issue a writ of restitution to the landlord – an order granting the landlord the right to take the property back from the tenant.  Once the writ is filed with the Court the court clerk will post the writ on the property and schedule a move out date.  On the move out date if the tenant is not gone from the property the sheriff’s deputy will then remove the tenant and their belongings from the premises.

How Bankruptcy Factors

Now that you have an understanding of the general procedure for evictions in Ohio we can proceed with how bankruptcy applies in these situations.  The harsh new laws under BAPCPA apply to tenants who have “lost” the possession hearing and the court has granted restitution to the landlord.  If a judgment has not been entered then the new BAPCPA rules do not apply.  However, for purposes of this post we will deal with situations where the landlord has been granted restitution.

If the tenant files bankruptcy after a judgment has been entered in the landlord’s favor, the tenant must pay one month of rent to the bankruptcy clerk immediately upon filing the bankruptcy petition.  In addition to paying one months rent to the clerk, the tenant/debtor must also file a “certification” under penalty of perjury that (1) the judgment permits the tenant to stay in the premises upon satisfaction of the entire judgment amount and (2) the tenant has deposited with the bankruptcy clerk “any rent which would become due during the thirty (30) day period after the filing of the bankruptcy petition.”  If the tenant complies with these requirements the tenant/debtor is then given a thirty day reprieve.  Basically, the “automatic stay” is in effect for a period of thirty days from the date that the bankruptcy petition is filed.

If the tenant wants to remain in the property beyond the initial thirty day period, the tenant must satisfy the amount stated in the judgment entered by the state court within 30 days following the filing of the bankruptcy petition and must file within those same thirty days a certification with the bankruptcy court that the tenant has paid this amount.  If the tenant satisfies these requirements, it is presumed that the automatic stay will remain in full force and effect until modified by the bankruptcy court.

Bankruptcy Isn’t Always The Answer

A tenant that can immediately pay one months rent and then cure any default amount of a judgment within thirty days would be better served to try and work things out with their landlord instead of filing for bankruptcy.  That being said, there probably are not many tenants that can meet all the requirements of BAPCPA.

One other note.  When a landlord is attempting to evict a tenant for non-monetary issues, for example because the tenant “endangered” the property or has used “illegal substances” on the property, 11 U.S.C. 362(a)(23) limits the application of the automatic stay and the landlord can file a certification at any time during the open bankruptcy case stating the circumstances that gave rise to the “social eviction.”  This will cause the automatic stay to be lifted without any further notice or order of the court fifteen days after the filing of this certificate.