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Eviction, tenants and bankruptcy: What can a creditor do?

Moving forward with an eviction is not an easy matter. Add in a tenant going through bankruptcy and the matter becomes even more complicated. Fortunately, the creditor in this situation has certain rights. The rights vary depending on the filing date for the bankruptcy.

How does bankruptcy filing date come into play when evicting a tenant? Landlords must take the bankruptcy filing date into consideration when attempting to evict a tenant. This date will fall either before or after the eviction process was initiated and will have the following implications:

  • Eviction process before filing for bankruptcy. An eviction can generally move forward if the creditor has a court-ordered eviction notice prior to the tenant filing for bankruptcy. However, there are some situations where the tenant must be given an opportunity to cure the default or pay off the debt. If this is done, the tenant could potentially stop the eviction process. In these situations, the landlord can generally object and take the case to court to complete the eviction process.
  • Eviction process after filing for bankruptcy. A creditor must tread carefully when dealing with a tenant that has already filed for and received approval to move forward with a bankruptcy proceeding. Once a petition for relief through bankruptcy is approved, the bankruptcy court issues an automatic stay. This court order requires that all attempts to collect on debt owed by the applicant cease. This means the creditor cannot move forward with an eviction. However, a remedy is available to creditors in this situation. The creditor can seek a lift from the stay from the bankruptcy court. If approved, the creditor can move forward with the eviction.

As noted in a recent publication in FindLaw, additional issues can arise. For example, a creditor generally need not wait for approval from the bankruptcy court to move forward with an eviction if there are concerns about illegal activity on the property.

Should creditors hire legal counsel when attempting to evict a tenant that has filed for bankruptcy? Navigating the legal issues that are present when bankruptcy and eviction intersect can make for a very complicated matter. As such, it is wise for creditors in this situation to seek the counsel of an experienced lawyer. Your attorney will review the situation and move forward in a matter that is better ensured to preserve your business interests.

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