When a person files a bankruptcy case, the United States Bankruptcy Court issues an order called an “Automatic Stay” Order. This is an order that requires all creditors, including your landlord, to stop all actions related to collecting their debt. The Bankruptcy stay will also stop any eviction actions, as long as a judgment has not yet been rendered.
If you file a Chapter 7 case, the rent that you owe your landlord prior to filing the bankruptcy case is a debt that can be discharged by the U.S. Bankruptcy Court. This means you have the option of moving out of the property while being relieved of the obligation to pay the past due rent. Filing a Chapter 7 case may also postpone the eviction which will allow you time to file a new place and move out.
You may be able to stay at your house through a Chapter 13 bankruptcy. If you have filed a Chapter 13 bankruptcy case while being behind on your rent, you must submit a Plan that provides for a reasonable time period to pay the landlord the past due rent, while also requiring you to pay the current rent.
It’s relatively common to owe a landlord money after being evicted from a rental property. Fortunately, since rent is an unsecured debt—just like a debt owed to a credit card company or medical provider—it will be discharged (forgiven) when you complete a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
While a bankruptcy will stop eviction, a bankruptcy discharge won’t erase past negative credit information, including evictions. The landlord has the right to report payment problems and an eviction status to credit bureaus. The negative information will stay on a credit report for as long as seven years after the event.
If you are experiencing an eviction in Louisville or surrounding counties and have questions, call Michael Marks at Wetterer & Clare for a free consultation and discuss all your options with an experienced attorney.