Does Bankruptcy Stop Eviction?

Many people struggling with debt fear losing their housing. That concern runs deep, and not just for those who are purchasing homes and fear foreclosure. Although the process and the financial impact is different, eviction can be just as traumatic as foreclosure. And, the eviction process typically moves much faster, leaving a renter little time to make alternate arrangements. That is challenging under any circumstances, but especially when financial resources are limited.

In 2019, the Mobile County Sheriff’s Department carried out 2,466 evictions, and the Montgomery County Sheriff 3,357. That is about 9 forcible evictions per day in Montgomery County, and that number does not include those who “voluntarily” moved out after being served with an eviction notice or sued for eviction. Alabama, Tennessee, and Mississippi temporarily froze evictions due to the pandemic; but these protections are temporary. In fact, in late April the Mississippi Center for Justice’s attempt to halt evictions in the state for a longer period failed when the state’s high court said it had no authority to stop those proceedings. Mississippi attorney Ed Woods, who is also a justice court judge in Warren County, Mississippi, notes that even though evictions were temporarily halted because of the pandemic, the obligation to pay rent was not. So, for those individuals affected by the pandemic, rent continued to accrue. That, combined with a loss of income, makes it easy for a landlord to get an eviction order. In fact, the justice courts in Mississippi are beginning to hear eviction cases again.

Eviction Proceedings Move Quickly

The residential eviction process for non-payment of rent is similar in Alabama, Tennessee, and Mississippi. In each state, the landlord must serve the tenant with a notice that allows a short period of time to pay in full before an eviction case can be filed. If the tenant makes payment in full during that time, the process terminates. 

In Tennessee, the tenant is allowed 14 days to catch up after the notice is served, though that time may be shortened to seven days if the tenant has been served with notice of the same breach within the previous six months. In Alabama, the notice period is seven days. And, in Mississippi, the tenant has just three days to catch up. There is one other important difference in Mississippi: under certain circumstances, Mississippi landlords are allowed to engage in “self-help” eviction, meaning that they may remove the tenant without a court order. However, this option is only available when it is set forth in the lease, and the landlord may not breach the peace in conducting the eviction.

Bankruptcy and Eviction

Because eviction proceedings move so quickly, the automatic stay in bankruptcy can be a valuable tool for renters trying to hold on to their homes. The automatic stay is a court order that tells creditors and debt collectors that they have to stop trying to collect from you for as long as the stay remains in effect. That is typical until a Chapter 7 case is completed or a creditor successfully petitions the court to lift the stay. In most consumer bankruptcy cases, the automatic stay is entered as soon as the case is filed, so quick action may stop an eviction proceeding in its tracks. 

However, whether or not the automatic stay halts eviction depends on where in the process you are. If you have received a notice or an eviction suit has been filed and you are considering bankruptcy, you should consult a local bankruptcy attorney immediately to find out how much time you have to proceed. 

It is also important to note that the automatic stay triggers a temporary pause in the action and does not solve the underlying problem. What happens next depends on the specifics of your situation and the type of bankruptcy you pursue. 

Chapter 7 Bankruptcy v. Chapter 13 Bankruptcy

Chapter 7 bankruptcy does not offer a long-term solution to tenants facing eviction for non-payment of rent. Rather, the automatic stay creates a break in the action. This time-out may allow the tenant time to either work out an agreement with the landlord. Alternatively, it can buy time for the tenant to make other living arrangements. Past-due rent can typically be discharged in a Chapter 7 case.

Chapter 13 bankruptcy, on the other hand, allows some tenants to avoid eviction or lease termination entirely and get caught up on past-due rent payments over time. This will not work for every tenant who has fallen behind, since it requires making regular rental payments as they come due plus regular payments toward the past-due balance. Chapter 13 is usually most useful for those who fell behind due to a short-term problem such as job loss, divorce, or a medical crisis. Someone who has come through a short-term interruption in income or spike in expenses may be able to make payments moving forward with a bit left over to catch up past-due balances. 

Ideally, a landlord would make arrangements with a tenant in that situation, but it does not always work that way. Building the past-due amount into a three to five-year Chapter 13 repayment plan can create a manageable structure for catching up without the pressure of possible eviction and other collection actions hanging over your head. 

Talk to an Experienced Bankruptcy Attorney Right Away

As you can see, there are many variables that impact how bankruptcy may help delay or avoid eviction and the type of bankruptcy that best serves a tenant’s needs. The best starting point is a consultation with an experienced bankruptcy attorney. And, if you have already been served notice or an eviction suit is underway, there is no time to delay. 

You can schedule your free, no-obligation consultation with one of our experienced bankruptcy attorneys in Alabama, Tennessee, or Mississippi right now. Just call 877-581-3396 or fill out the contact form on this page.