Will Filing For Bankruptcy Protect Me From Eviction?

In response to the COVID-19 pandemic, several states and cities across the country placed a temporary moratorium on evictions. But not Alabama. The only renters who have any sort of protection against eviction here are those living in HUD properties and rental houses with mortgages backed by Fannie Mae and Freddie Mac. This is one of the reasons Alabama was ranked the worst state in the nation to live in during the coronavirus crisis.

Many renters who are having trouble making ends meet wonder if bankruptcy may be a solution. Renters who anticipate being evicted, or who have recently been served with an eviction notice, may be able to pause their eviction by filing for bankruptcy. Filing for bankruptcy hits the pause button on all other legal actions the debtor is facing — including eviction. What happens next depends on the type of bankruptcy filed.

Chapter 7 vs. Chapter 13

A debtor who files for bankruptcy under Chapter 7 of the bankruptcy code will be protected from eviction while their bankruptcy case is pending. So, a few months at best. During this time, the renter should use bankruptcy as an opportunity to work out a new agreement with the landlord or find a new living arrangement.

In many instances, landlords would prefer to work with their current tenants to help them to continue occupying the property (even in the midst of financial difficulty) rather than evicting the tenant and finding someone new to move in. This is especially true if you have a good relationship with your landlord, you have kept the property in good repair, and you have a good general record paying your rent on time in the past. Evictions are costly and time-consuming for landlords, so it never hurts to reach out to them and see if they would be open to working out an arrangement that allows you to stay where you are.

A Chapter 7 bankruptcy is often called a “fresh start” bankruptcy because most of the filer’s debts are wiped out by the court. Past due rent is a type of debt that can typically be discharged. Chapter 7 can also help consumers get rid of other debts that are causing them to get behind financially. This may include credit cards and various types of unsecured personal loans (unfortunately, student loans and most tax debts cannot be discharged through bankruptcy). Eliminating the dischargeable debts can help ease your financial burden and make it easier to pay your rent.

A renter who really wants to stay in their current rental and has the cash flow needed to keep making payments while also catching up on past-due payments may want to file for bankruptcy under Chapter 13. A Chapter 13 bankruptcy includes a multi-year, court-supervised repayment plan that is designed to get the filer caught up on their debt and other obligations.

When Filing for Bankruptcy Won’t Help

Although filing for bankruptcy may protect a renter who fears eviction, it may not protect a renter who is already in the process of being evicted or a renter that is endangering the rental property.

If the landlord got a judgment for possession prior to the tenant filing for bankruptcy, the tenant will need to vacate the property. If things have reached this point, filing for bankruptcy will not stop the eviction. This is why it is critical for tenants served with an eviction notice to speak with an attorney as soon as possible. Eviction cases proceed very quickly under Alabama law.

Landlords can also proceed with an eviction if they can show that the tenant is endangering the rental property or has used drugs on the property in the last 30 days. For example, if a tenant has done widespread damage to their rental property (e.g., broken windows, holes in the walls, damaged appliances, etc.), a landlord can evict the tenant regardless of whether or not they are current on their rent.

Mobile & Baldwin County Bankruptcy Attorneys

If you are facing eviction in Alabama and you suspect that filing for bankruptcy may be the best path forward, the Padgett and Robertson team is here to help. Our attorneys have extensive experience helping clients effectively utilize the bankruptcy codes to help them stay in their homes and gain a fresh start financially. Contact us today to schedule a free initial consultation where we can discuss your options.