Can Bankruptcy Shield You from Eviction? (Covid Edition)

*Due to the Covid-19 Pandemic, federal and state laws have been enacted which can supersede other laws regarding evictions. Please visit the following link for the most up to date information: (https://www.nolo.com/legal-encyclopedia/coronavirus-covid-19-california-eviction-bans-and-tenant-protections.html)

**Eviction Moratorium extended to June 30th, 2021 by Gavin Newsom (applies to CA). 

Covid-19 brought the economy to a screeching halt and with it, unprecedented unemployment. The extended nature of this pandemic inevitably leads to eviction. Filing for bankruptcy could be a legal tool to help someone temporarily avoid homelessness. This article will cover the relationship between evictions and bankruptcies. 

We will also address some of the major federal and state laws addressing evictions. Depending on when you read this, they may or may not apply to you.   

Can Bankruptcy Stop An Eviction?

Quick Answer

Yes, bankruptcy can stop an eviction case — IF — it is filed before a judgment is issued for possession of the property.

If there’s already a judgment for possession of the property, the bankruptcy doesn’t help with the turnover of possession (e.g., getting you out so the landlord can have it back). The bankruptcy will still discharge any “monetary” damages awarded in the judgment.

What do you mean by “stop” an eviction? How does that work exactly? So I get to stay where I’m living?

Bankruptcy provides protection against “all attempts to collect a debt.” When the landlord is evicting you for unpaid rent, he’s collecting a debt. So it “stops” that as a form of collecting a debt. 

So if that process “eviction” has to stop in its tracks, then yes, you stay in the property. Bankruptcy is like an umbrella shielding debtors from their creditors (the “rain”).

The living space is currently under the umbrella with the Debtor filing bankruptcy. Although the landlord has to stop collecting the debt, he can ask for permission to continue the eviction case. “Take the living space out from under the umbrella” to continue his eviction case.

As such, a bankruptcy is only a temporary delay when it comes to evictions.

Federal Moratorium on Evictions

The moratorium only postpones evictions but does not stop them. The moratorium was supposed to expire on February 1st (a lot of back rent would have been legally owed). At the time of this writing, it has been extended to June 30th, 2021.

If local state or county laws do not offer renters further protections, a slew of evictions will likely hit the pipeline. 

The Original Eviction Moratorium (as of February 2021) — has been updated since

Effective September 4, 2020 through January 31, 2021, landlords are prohibited from evicting renters if they are paying 25% of their monthly rent and provide a COVID financial declaration form. 

Laws That Affect Evictions

There are three bodies of law to protect your renter rights at the moment: federal, state and local (your city).

• Federal – meaning nationwide laws in place to:
  • Evictions: Temporarily Halt Evictions due to CDC guidelines  (Effective 2020-09-04 through 2021-01-31)
  • Mortgage relief applied to Tenants where landlords get mortgage relief through:
    • FHA – effective through 2021-01-28
    • Fannie Mae/ Freddie Mac – effective through 2021-02-28

• California State Tenant Relief Act of 2020:
  • Evictions: Statewide ban against eviction for covid related financial distress situation – will require a COVID-19 declaration within 15 days of the new “15 Day Notice.”
    • As of 2020-09-01 through 2021-01-31, tenants must pay a minimum of 25% of the total rent due going forward. People who fail to make this payment, can be evicted as of 2021-02-01.
  • The Act will not prevent eviction for those:
    • Behind on rent prior to 2020-03-1;
    • Have legal grounds to be evicted for reasons “other” than non-payment of rent;
    • Rent is not forgiven and collection can begin 3/1/2021 in small claims court – but prohibited from being reported on your credit. 

• City Based Ordinances: 150 Cities and locals have enacted their own measures regarding eviction. 

Stimulus Bill — Rent Relief

While this does not affect eviction laws directly, this recent federal “rent relief” stimulus bill is very applicable to the situation at hand:

https://www.latimes.com/business/story/2021-01-14/federal-stimulus-bill-rent-relief-is-coming

Qualifications (Copy Pasted below):

“Households that make 80% or less of the median income in their area and include at least one person who qualifies for unemployment or has experienced a financial hardship because of the pandemic.

Households must also show they are at risk of homelessness or housing instability to qualify.

The income qualification is determined by household income for all of 2020, or monthly income when your household applies for help.”

How do I apply?
This isn’t clear yet. The U.S Treasury Department says you will be able to apply through programs set up by states and some local governments.

Remember

Laws are changing rapidly in the pandemic climate. While we try to update our articles, some of this information could be outdated by the time you read it. Just keep that in mind. Please contact us if you are experiencing financial hardship and are wondering if you may qualify for bankruptcy.

References:

https://www.cnn.com/2020/12/23/success/what-renters-need-eviction-moratorium-fe-series/index.html