You are a landlord in California and your tenant has not been paying the rent. You comply with all of the requirements per California law as far as giving the proper notice and allowing the tenant to cure the default on the lease. The tenant does not cure the default, and you file an eviction lawsuit so that the Court can help you get the tenant out of your property. Nonetheless, right before your eviction trial, the tenant files a bankruptcy and the judge tells you that he/she will not allow you to proceed with the eviction until the bankruptcy filed by the tenant is dealt with. Do these facts apply to a situation that you are (was) going through? If so, you are not alone. Unfortunately for landlords, this fact pattern is all too common in the eviction/bankruptcy world. The question is what needs to be done next so that eviction proceedings can resume.
Retain Bankruptcy Counsel!
While it is not required, we recommend that the landlord retain bankruptcy counsel to help him/her seek appropriate relief from the bankruptcy Court. A bankruptcy counsel can explain the process and provide estimate as to how long it will take until eviction proceedings can resume. Bankruptcy law can be completed because it is based on federal statutes, so a qualified bankruptcy counsel who does creditor work is essential.
The Automatic Stay and Seeking Relief
When a tenant (or any other party) files a bankruptcy, no matter the bankruptcy chapter, the automatic stay is immediately imposed and no further debt-collection of eviction proceedings can resume. All attempts to evict the tenant must stop, or the landlord can face severe sanctions by a bankruptcy court. The immediacy of the automatic stay is often the sole reason that the tenant files a bankruptcy in the first place. The automatic stay normally does not “go away” until the bankruptcy case is dismissed or closed, or the Court orders that the automatic stay be vacated.
In order for a landlord to get a Court to vacate the automatic stay, a Motion can be filed. Absent extraordinary facts, Courts often grant such motions. However, since these Motions need to be litigated properly, it is advisable that the landlord retain an experienced attorney so that there are no issues with the Motion resulting in even more delay.
If the tenant decides to file a bankruptcy after the state court had issued a judgement for possession (allowing for eviction), the Bankruptcy Code may require the tenant to post money with the Clerk of the Court or risk the automatic stay not coming into effect. In such a situation, it may also be advisable to file a Motion with the Court requesting that the Court either confirm that no automatic stay exists, or order that the automatic stay be vacated.
Consult With A Qualified Attorney Now!
Bankruptcy can be complicated for non-lawyers, and thus, it is advisable that a landlord contact an attorney when a defaulting tenant files a bankruptcy to stop an eviction. If you are a landlord in need of legal bankrutpcy assistance, contact Katz Law now! We are California attorneys located in Los Angeles who have dealt with various scenarios involving bankruptcies and evictions.
Call us at (844) KATZ-LAW for a FREE consultation!