When you file for bankruptcy relief, the automatic stay goes into effect. The automatic stay prevents creditors from taking specific actions to collect a debt without bankruptcy court approval. Generally, the automatic stay remains in effect throughout your Chapter 13 bankruptcy case, but there are some exceptions.
Filing a Chapter 13 bankruptcy case temporarily stops an eviction if:
Even if your landlord has not received a judgment of possession, your landlord may file a motion to lift the automatic stay. The landlord would need to present evidence that its interests are not adequately protected without the ability to evict you from the premises.
In some cases, the hold on an eviction could continue if you repay the back rent through your Chapter 13 plan. You would also need to immediately begin paying your regular rent and remain current on your future rent payments. The landlord could request that the back rent be paid as an administrative debt. If so, the debt would be given priority in your Chapter 13 plan.
However, the landlord may not be willing to work with you. If not, it would file a motion to lift the automatic stay. The judge would consider several factors, such as your ability to remain current on future rent payments while making your Chapter 13 plan payment each month. Your budget would need to reflect sufficient income to cover your expenses, rent, and Chapter 13 payment.
State laws differ. It is wise to seek legal advice from an experienced Chapter 13 lawyer if you are behind on your rent payments. Ascend can help you locate a bankruptcy attorney near you. Most attorneys provide free consultations, so it does not cost you anything to talk with a lawyer.
Filing for bankruptcy relief might still be your best option for getting out of debt. Back rent is considered unsecured debt. Therefore, if you can move to another location, you can include the back rent in your bankruptcy case.
Under Chapter 7, you should be able to discharge the back rent payments provided there is no fraud involved in incurring the debt.
In a Chapter 13 case, you would pay a percentage of the back rent payments through your Chapter 13 plan. For example, if you can afford to pay 10 percent to your unsecured creditors, your landlord would receive only 10 percent of the back payments. When you complete your Chapter 13 plan, the remaining amount will be discharged.
If you find that you cannot afford your rent payments while in a Chapter 13 plan, talk with your bankruptcy lawyer immediately. A change in your financial situation that makes it impossible to pay rent could mean that you do not have sufficient income to be in Chapter 13. If so, you might qualify to convert your bankruptcy case to a Chapter 7 case.
Converting a Chapter 13 case to a Chapter 7 case is much less expensive than allowing your Chapter 13 case to be dismissed and refiled under Chapter 7.
Refiling a new bankruptcy case under Chapter 7 would require you to take your credit counseling and debtor education courses again. The attorney fee for refiling a case might be more expensive than converting the case. Additionally, the filing fee for converting a Chapter 13 case is much less expensive than the filing fee for a Chapter 7 case.
Even though you are renting, the place you rent is your home. One of the challenges of dealing with debt problems is keeping a place to live. Filing for bankruptcy relief can help you avoid homelessness. In addition, getting rid of other debts means you have more money to put toward rent or mortgage payments.
If you need to move, you can get rid of your mortgage or back rent through your bankruptcy case. It gives you a fresh start to recover and rebuild after a financial hardship. Doing nothing or trying to handle debt problems without experienced legal advice could make matters worse.