by Attorney Janet Portman

The new bankruptcy law makes it easier for landlords to evict bankrupt tenants.

It's not uncommon for tenants with significant financial burdens to declare bankruptcy. There are several kinds of bankruptcy; the most common are "Chapter 7," in which most debts are wiped out after as many creditors as possible have been paid; and "Chapter 13," in which the debts remain but are paid off over time according to a court-approved plan. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect on October 16, 2005, makes it easier for landlords to evict bankrupt tenants. The steps to take depend on whether the tenant's filing precedes or follows the date you win a judgment awarding you possession of the rental.

The tenant has already filed

If your tenant has filed for bankruptcy and is (or becomes) behind in the rent, or violates another term of his tenancy (such as keeping a pet in violation of a no-pets clause), you can't deliver a termination notice, let alone proceed with or initiate an eviction lawsuit. This prohibition is known as the "automatic stay," and it means that you need to go to the federal bankruptcy court and ask the judge to "lift," or remove the stay. (U.S. Code § 365(e).) In most cases, you'll get the stay lifted within a matter of days and can proceed with your termination and eviction. (You won't have to go to court if your tenant is using illegal drugs or endangering the property, as explained below in "Bankrupt tenants, drugs, and damage.")

The tenant files after you've won a judgment for possession

The automatic stay does not apply, however if you completed your eviction proceeding and got a judgment for possession before the tenant filed for bankruptcy. Under the new law, it's clear that landlords can proceed with the eviction without having to ask a judge to lift the stay--tenants can no longer stave-off eviction by last-minute bankruptcy filings.

In very narrow circumstances, and only for evictions based on rent nonpayment, a tenant can stop the eviction even if you got a judgment before the tenant filed for bankruptcy. Here are the specifics:

• With the bankruptcy petition, the tenant must file a paper certifying that state law allows tenants to avoid eviction by paying the unpaid rent, even after the landlord has won a judgment for possession. Very few states extend this option to tenants. The certification must be served on the landlord.
• At the same time, the tenant must deposit with the clerk of the bankruptcy court any rent that would be due 30 days from the date the petition is filed.
• The tenant then has 30 days after filing the petition to actually pay the back rent. He must file another certification with the bankruptcy court (and serve it on the landlord), stating that he has paid the amount due.

At any point during these 30 days, you can file an objection to the tenant's certification, and you'll get a hearing in the bankruptcy court within 10 days. If you convince the judge that the tenant's certifications are not true, the court will lift the stay and you can proceed to recover possession of the property.

Bankrupt tenants, drugs, and damage

You may find yourself needing to evict a tenant who is using illegal drugs on the property or endangering your property. If the tenant files for bankruptcy before you win a judgment for possession, you can proceed with the eviction without asking the bankruptcy judge to lift the stay. Here are the steps to take:

When you've begun an eviction case but don't have a judgment. Prepare a certification, or sworn statement, that you have begun an unlawful detainer case based on the tenant's endangerment of the property or use of illegal drugs on the property (or such use by the tenant's guests).

When you haven't yet filed your eviction lawsuit. Prepare a certification, or sworn statement, that the activity described above has happened within the past 30 days.

File the certification with the bankruptcy court and serve the tenant as you would serve any legal notice. If your tenant does not file an objection within 15 days of being served, you can proceed with the eviction without asking the court to lift the stay. A tenant who objects must file with the court, and serve on you, a certification challenging the truth of your certification. The bankruptcy court will hold a hearing within ten days, at which the tenant must convince the court that the situation you describe did not exist or has been remedied. If the court rules for you, you may proceed with the eviction without asking that the stay be lifted; but if the tenant wins, you may not proceed.

What happens to the lease after bankruptcy?

Filing for bankruptcy affects a tenancy even if the tenant is not behind in the rent or otherwise in violation of the lease. After he files, the "bankruptcy trustee" (a person appointed by the bankruptcy court to oversee the case) must decide whether to carry on with or terminate the lease or rental agreement. In most situations, the trustee will let the tenant keep the lease, since it wouldn't benefit o his creditors to force him to incur the expense of finding a new home (the outcome may be different, however, if he's paying an outlandish rent and there's plenty of modest rentals available). First, however, he must pay any unpaid back rent. If the trustee keeps the lease, you have the right to ask the bankruptcy court to demand that the tenant show proof of his ability to pay future rent. (11 U.S. Code §§ 365(b)(1)(A), (B), & (C).) Of course, if he becomes unable to pay the rent after the lease is assumed, you can ask the bankruptcy court to lift the stay so that you can terminate and, if necessary, evict.