How to Handle Tenants Who File for Bankruptcy to Avoid Eviction
As a property owner, you’ve likely had your share of tenants who push the limits when it comes to paying late. But what happens when a tenant declares bankruptcy in a way to avoid eviction when they know they cannot afford their rent? This leaves you in a precarious position—unable to collect rent but also unable to turn over the property and rent it to someone who will pay.
When a tenant has declared bankruptcy, you must tread very carefully to protect yourself legally and prevent legal issues. We can help. Call the landlord-tenant attorneys at Crawford & von Keller at 803-790-2626 to schedule a consultation right away.
Bankruptcy and the Automatic Stay
When an individual files for bankruptcy, this action triggers an automatic stay. The automatic stay stops creditors from attempting to collect payments for debt. However, the automatic stay can also prevent a filer’s landlord from evicting them. This generally means several additional months without rental income on top of however many payments the tenant has already missed.
It’s important to note that this is a temporary measure. Bankruptcy doesn’t make a tenant’s failure to pay go away.
Your Legal Rights as a Landlord
In the meantime, what do you do? Are you stuck maintaining property and keeping it habitable for a tenant who is intentionally taking advantage of you? Landlords do enjoy some protections under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Prior to this act, landlords’ hands were effectively tied when a tenant filed for bankruptcy. This act put limitations in place that give landlords options. Additionally, the stay normally does not apply to cases where the eviction is due to endangerment of the property or illegal use of controlled substances.
Additionally, the landlord may go to the court and ask for the automatic stay to be lifted for the eviction to proceed. This does require court approval, but it can save you from months of worrying about angry tenants destroying your property.
Steps to Take
Before you do anything else, you should reach out and talk to a landlord-tenant dispute attorney with experience in bankruptcy and how it affects evictions. You must be very careful at this stage, as violating the automatic stay—even unintentionally—can cost you money and land you in legal trouble.
With the help of your attorney, you can decide how to proceed. You might choose to ask the court to lift the automatic stay, or you may determine whether or not your case fits into one of the exceptions permitted by the Bankruptcy Abuse Prevention and Consumer Protection Act. Depending on which route you go, you have to follow specific steps to notify the tenant as required by law. Your lawyer can ensure that all of your bases are covered.
Protecting Your Best Interests
Of course, the best way to protect yourself from this expensive and stressful scenario is to avoid it entirely in the first place. This means being aware of your tenants’ payment habits, enforcing due dates, and not giving extra chance after extra chance. If you wait too long to evict them, they may end up covered by the shield of the automatic stay, leaving you with minimal options.
Take Steps to Protect Your Business—Contact Crawford & von Keller
If your South Carolina tenant has filed bankruptcy to delay eviction, do not wait any longer to seek legal advice. Call our team at 803-790-2626 or contact us online to discuss your case now.
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