Bankruptcies Part Deux: The Landlord Strikes Back

An owner or manager has few options when a tenant files for bankruptcy due to the automatic stay. Generally, they cannot seek past due rent (other than through a lengthy plan), but they may be able to attain possession of the premises. If a resident fails or refuses to pay rent and decides to file for bankruptcy, the owner/manager cannot continue with filing the eviction or even send late notices, although they can send balance due statements. Doing so would violate the automatic stay because the bankruptcy proceeding stops any action against the debtor. If a resident fails to pay new rent as it comes due after filing a bankruptcy petition, a manager/owner can request the bankruptcy court to grant relief from the automatic stay. The owner makes this request by filing a motion with the bankruptcy court to remove the stay. However, other than the motion to vacate the stay, any communication directed to the resident attempting to collect a debt can be viewed as a violation of the automatic stay. Lastly, an exception exists for manager/owners to continue with the eviction proceeding once they have a judgment from the magistrate court in the event the tenant files for bankruptcy during this time. If the judgment is granted, and the resident files for bankruptcy after, a manager/owner can continue with gaining possession of the property but cannot send any notices or attempt to collect any outstanding balance or past due rent.