Bankruptcy and Back Rent: What You Need to Know

An eviction is devastating. Whether you have lost your job, or you simply got behind on your bills, your landlord can opt to evict you if you get behind on your rent payments. In a situation in which you could face eviction because you are considerably behind on your rent payments, you may want to consider filing for bankruptcy. Although it sounds drastic, bankruptcy may be able to keep you in your home. Here is what you need to know:

How Can Bankruptcy Keep You in Your Rental Home?

When you file for bankruptcy, a court order is filed that stops your creditors from contacting you for payment while you are going through the bankruptcy process. Any collection of payments must cease until your bankruptcy is settled. This includes collection efforts from a landlord.

One thing to remember is that an automatic stay is simply a way to delay paying your back rent. This does not mean you no longer have to pay what you owe. You can use this time to either find a new place to stay or possibly work a payment arrangement out with your landlord.

After you have finished the bankruptcy process, your finances will be more organized, and you will have a better idea of how much money you have to spend on your living arrangements each month. If you want to stay in your home, it is strongly encouraged that you speak to your landlord to see if that is possible. Keep in mind, however, that your landlord may no longer want you in the rental if they believe you will eventually be unable to pay in the future.

Can a Landlord Have the Automatic Stay Overturned?

The point of the automatic stay is to pause collection and eviction efforts. However, a landlord can go to court and fight the court order so they can continue to pursue your rent. A landlord can file a motion to relieve the automatic stay. If this happens, you can present your case during the hearing. If a judge decides to rule in the landlord's favor, you can still face eviction.

Can Back Rent Be Discharged in Your Bankruptcy?

Whether or not your back rent can be discharged depends on the chapter bankruptcy you file. Filing Chapter 13 bankruptcy can add the back rent into your repayment plan. The landlord will be paid, but it could be less money or paid in small increments. Chapter 7 bankruptcy discharges debts, which can include back rent. However, once the automatic stay is over, your landlord may still opt to evict you despite paying your back rent. Be sure to speak to a bankruptcy attorney to be fully apprised of your legal rights in this situation.