My Landlord is trying to evict me because I defaulted on my payment arrangements.  My hands were tied because I didn’t get a paycheck for 2 weeks in a row.  Will filing bankruptcy stop the eviction?

The short answer to this question is Yes, filing bankruptcy will stop an eviction.  But what happens next? Is it worth the cost? How long does it stop the eviction?

When a bankruptcy case is filed a federal order immediately comes into existence that stops all collection action, including evictions, garnishments, repossessions, creditor phone calls, etc.  We call this order the Automatic Stay because it automatically comes into existence when the case is filed.

Evictions in Nebraska can completed within about 3 weeks!

In Nebraska, the eviction process is very swift.  When a payment default on a lease agreement occurs the landlord will send the tenant a Three Day Notice to Quit.  If the delinquent rent is not paid within three days, the landlord has the right to file an eviction lawsuit (called a “Forcible Entry & Detainer”) .  Once the eviction lawsuit is filed, the court will schedule an eviction hearing, typically within 14 days.  On the day of that hearing the court will sign an eviction order (called a Writ of Restitution) and the sheriff will then be called to carry out the eviction.  So, evictions in Nebraska can completed within about 3 weeks.

Filing Bankruptcy Before the Landlord Obtains a Judgment of Possession.

If a bankruptcy case is filed before the eviction hearing is held, the eviction is placed on hold.  However, the landlord may file a motion with the bankruptcy court to obtain permission to continue with the eviction and the bankruptcy court will typically grant this request unless the tenant is able to cure the default quickly. If the landlord files this motion the bankruptcy court will scheduled a hearing within 30 days on average.

How quickly must the past due rent be paid?  It varies from case to case, but more than likely the tenant will be required to pay future rent on time and then cure the existing default within a short period of time.  The court will take into consideration many factors such as the length of the tenancy, the frequency of default, the debtor’s current income level and job tenure, whether minor children or elderly persons reside in the home, and the likelihood of the default being paid quickly.

As a practical matter, you must take into the consideration the cost of filing bankruptcy.  To file a Chapter 7 case the entire court fee and legal fee must be paid in advance.  The typical chapter 7 case costs $1,200 to $1,500 in Nebraska.  So, if a tenant is behind $800 on rent, it would be wiser and cheaper to pay the rent than to file bankruptcy.  Chapter 13 cases are 3 to 5 year repayment plans and the cost of filing is much less, typically around $400.

Filing Bankruptcy After the Landlord Obtains a Judgment of Possession.

Nebraska law does not permit a tenant to cure a rent default after an eviction order is entered, so filing bankruptcy after a judgment of possession is entered is not helpful.  Unless the eviction judgment allows for the curing of the default (something I have never seen in Nebraska) filing bankruptcy after the Writ of Restitution is entered will not stop the eviction.

Will filing bankruptcy wipe out the debt to the landlord?

Yes, bankruptcy will discharge the debt owed to a landlord for past and future rent.  If a judgment for money has been given to the landlord, the bankruptcy will be able to discharge that judgment as well.

Will bankruptcy allow me to terminate my lease early?

Bankruptcy will discharge any unwanted executory contract, such as a rental agreement or vehicle lease. So, if you wish to terminate your lease, even if you are current on the payment, the bankruptcy will discharge the lease obligation.  If the landlord has been provided notice of the bankruptcy, the lease agreement is discharged and the agreement is basically converted to a month-to-month tenancy.  If you continue to pay rent and the landlord accepts the payment you may continue to reside in the property until you or the landlord elect to end the relationship.  To end a voluntary month-to-month rental agreement usually requires 30 days written notice to the other party.

Legal Aid Landlord & Tenant Handbook.

Legal Aid of Nebraska has written a wonderful handbook regarding landlord and tenant rights.  The handbook has lots of useful information on how to respond to an eviction lawsuit.  If you are being evicted or if you are just having problems with a difficult landlord, this handbook is a must read.

Image courtesy of Flickr and Mark Turnauckus.