Debt can devastate nearly every aspect of an individual’s life and livelihood. Even if you have already cut out unnecessary expenses, created a restrictive budget, and consulted an attorney, staying current on all of your accounts could prove challenging. After making your monthly payments, you may have little left over for rent.
Falling behind on rent can leave debtors in a difficult position. However, you may have options beyond forfeiting a Brooklyn home or apartment. Under many circumstances, filing for bankruptcy can afford tenants the relief they need to forestall eviction while they re-establish their credit.
Bankruptcy and Eviction in Brooklyn
When a New York resident files for bankruptcy, the court enacts an automatic stay on collections. Defined by Section 362 of the United States Bankruptcy Code, an automatic stay restricts all acts and proceedings intended to recover a past-due debt.
An automatic stay broadly affords the following types of relief:
- Collectors may not file or litigate claims-related cases.
- The courts will not enforce a prepetition judgment against a debtor or their assets.
- The debtor’s properties, including real properties, cannot be obtained or possessed during bankruptcy proceedings.
- Landlords and banks cannot create, perfect, or enforce a lien against a property.
The automatic stay protects Brooklynites with debt from credit card companies, medical debt collection companies, and other debt-related seizures. However, the relief afforded by an automatic stay extends beyond collections: once a debtor has filed for bankruptcy, their landlord can neither serve an eviction notice nor enforce an existing notice.
How Landlords Try to Circumvent Automatic Stays
The automatic stay provided by the U.S. Bankruptcy Code can forestall a landlord’s efforts to evict a tenant who has fallen behind on rent.
However, landlords need not accept the conditions of an automatic stay. If they have compelling reason to evict a resident, they may file a motion for relief from the automatic stay. Should the court grant the landlord’s motion, then the eviction may proceed.
In New York, and most other states, the courts typically favor landlords. If the court grants the property owner’s motion, then the landlord may circumvent the automatic stay to enforce an eviction order.
The Benefits of Filing for Bankruptcy
An automatic stay cannot always shield indebted tenants from eviction. However, even if the landlord files a motion for relief from the automatic stay, the court may take several days, weeks, or months to adjudicate the request.
While the court is considering the landlord’s request, bankruptcy provides an opportunity to:
- Pay off your remaining debts
- Enter a payment plan
- Discharge past-due accounts
A successful or favorable bankruptcy settlement could offer tenants the time and flexibility needed to begin rebuilding their savings and—perhaps—reallocate some income or assets toward the payment of past-due rent. Under many circumstances, simply filing for bankruptcy and receiving the short-term protection of an automatic stay is sufficient for many tenants to negotiate their existing debts and reach an understanding with their landlord.
However, tenants who are considering bankruptcy and are at high risk for eviction cannot afford to wait. Even with an automatic stay in place, eviction proceedings can be difficult to resist. Once the landlord begins retaking possession of their property, renters may lose the protections afforded by their automatic stay.
An experienced New York City bankruptcy lawyer could help you, or a loved one, navigate bankruptcy proceedings, working toward a settlement that gives you the chance to continue living in dignity.