Bankruptcy a Tenant Tactic

     Some tenants think that filing a bankruptcy petition will prevent them from being evicted. This is not always true.  It will however through a road block into your attempt to resolve a problem with a tenant, be it failure to pay rent, a nuisance, or any other viable reason to pursue an unlawful detainer.

     This is one of those occasions* where the Landlord should immediately seek legal representation.  The landlord that attempts to go it alone in bankruptcy court will be disappointed and will in the long run lose more than he/she gains.

     Bankruptcy is a complicated legal specialty and explaining it is beyond the scope of this Article, however, here are some the basic issues you will face as it relates to unlawful detainer proceedings:

  • A tenant who files a bankruptcy normally is entitled to an immediate automatic stay (delay) of a pending unlawful detainer action. If you haven’t already filed the unlawful detainer action, the automatic stay prevents you from taking steps such as serving a three-day notice or filing the action.

  • You may, however, petition the bankruptcy court for permission to proceed with the unlawful detainer action (called “relief from the automatic stay”)

  • The automatic stay may continue in effect until the bankruptcy case is closed, dismissed, or completed. On the other hand, the bankruptcy court may lift the stay if you can show that you are entitled to relief.

  • The automatic stay normally does not prevent you from enforcing an unlawful detainer judgment that was obtained before the tenant’s petition was filed. In some cases, however, the tenant may be able to keep the stay in effect for 30 days after the petition is filed.

  • The automatic stay does not apply if your eviction action is based on the tenant’s endangering the rental property or using illegal controlled substances on the property, and if you file a required certification with the bankruptcy court. The stay normally will remain in effect, however, for 15 days after you file the certification with the court.

  • A bankruptcy case can be dismissed for “cause”—for example, if the tenant neglects to pay fees or file necessary schedules and financial information, causes unreasonable delay that harms you, the landlord, or files the case in bad faith.

*the occasions a Landlord needs counsel are 1.  If the landlord is an LLC,   2.  If the landlord is a Corporation.  Int these case the landlord cannot file in propria persona but will need the services of a member of the California Bar.