Do you owe thousands of dollars in unpaid rent due to COVID19? Read below to see how Chapter 7 bankruptcy can help discharge past due rent. It’s expensive to live in the state of Florida, since rent takes a hefty chunk of an individual’s total income. Therefore, it is not unusual for many Florida tenants to be behind in their rent while some teeter on the verge of eviction. To make matters worse, evictions are currently soaring nationwide due to the coronavirus crisis.
Chapter 7 Bankruptcy and the Current Eviction Moratorium
How Bankruptcy Saved My Family And How It May Save Yours
The COVID-19 pandemic and the subsequent economic impact has already affected millions of Americans and thousands of renters in Florida are at risk of homelessness due to inability to pay their rent. Fortunately, tenants are temporarily getting protection from eviction for non-payment of rent under various emergency government measures.
Federal CDC Eviction Moratorium
Because of the unemployment and financial struggles due to the pandemic, there was a statewide ban on housing evictions in Florida that came into effect on April 1st 2020. This moratorium on evictions has been extended five times over the course of six months.
The last Florida eviction moratorium, which expired on September 1st, has been extended to December 31st under the Centers for Disease Control and Prevention (CDC) recent order. The 2nd stimulus package extends this moratorium until January 31, 2020. The CDC federal moratorium puts a temporary ban on landlords taking action against tenants for non-payment of rent and other utility service charges.
So Florida families who can’t pay rent due to Covid-19 related financial hardships such as layoffs, loss of household income or huge out-of-pocket medical expenses can continue to get protections under this CDC eviction moratorium.
Criteria: Tenants who are seeking relief under the federal moratorium must meet the criteria outlined by the CDC. To qualify for protection, the tenant:
- must expect to earn no more than $99,000 or $198,000 if filing a joint return in 2020
- has received an economic stimulus check under the CARES Act
- was not required to report any income to the IRS in 2019
- has sought all available government assistance to make their rental payments
Limitations of Eviction Moratorium
The moratorium looks like a panacea for all problems but this is not true. The most important thing about the eviction moratoriums is that they are temporary and do not forgive or reduce rent payments. This means, unfortunately, the moratorium will not help renters pay rent but it just delays the threat of eviction and there are some loopholes in it that put certain renters at risk of removal.
This federal protection is quickly disappearing and in some cases, it is already expired. You are already several months behind on rent and continue to accumulate debt during this period and when this temporary halt of evictions end on December 31, 2020, your landlord may demand payments in full that you’re not made prior to and during the temporary halt.
Without the extension of eviction ban and other federal financial support, many renters could be facing homelessness when the eviction moratorium expires on December 31 (now extended by one more month under the new coronavirus stimulus deal, lasting through January 31, 2021). On top of that, most landlords will not even consider a tenant with a previous eviction record.
Housing is undeniably a basic human necessity and those who are evicted often lose their jobs, possessions, community connections, and even health. If you are depending on the anti-eviction provisions of the CARES Act to protect you from being evicted from where you’re living, then it would make more sense to consider filing for bankruptcy.
Using Chapter 7 Bankruptcy to Stop an Eviction for Rent Arrears
Filing Chapter 7 bankruptcy can put an automatic stay on eviction actions and also prevent the landlord from collecting any past due rent that you owe. You can receive a discharge of past-due rents by filing a Chapter 7 bankruptcy, but you can still be evicted. So if you plan on moving but only looking to get relief from the past due rent you owe, then filing Chapter 7 is the best option for you.
In general, the automatic stay can provide relief to tenants by preventing the landlords from beginning or continuing with eviction proceedings. But in 2005, the bankruptcy law was revised that give landlords more power to evict tenants who file for bankruptcy, despite the automatic stay. There are two situations where bankruptcy will not stop an eviction:
- The landlord obtains a judgment of possession of the property before the tenant filed for bankruptcy
- The landlord claims that the tenant is endangering the property or illegally using drugs
Waiting too long to file for bankruptcy can limit your power to retain control over the situation and comes with the consequence of losing your home. So in order to stop an eviction through bankruptcy, it is critical for you to act immediately by filing your case before the landlord gets an order of possession. Please call the DeVries Law Firm, P.A. in Jacksonville, Florida at 904-348-0030 to discuss how bankruptcy may help you.
Lease Agreements in Chapter 7: Assuming or Rejecting the Lease
There are two options for tenants when it comes to lease contracts in bankruptcy. The contract may be either “assumed” or “rejected”. Once you a file a Chapter 7, you will be given 60 days to decide whether to reject or assume the lease agreement.
Both the debtor (tenant here) and the bankruptcy court-appointed trustee can exercise these rights but generally, the trustee will not assume a lease as it viewed as more of a liability than an asset.
Since most tenants who want to file for Chapter 7 are usually behind in their monthly rent payments and can unlikely afford future rent payments, rejecting an executory contract/lease agreement gives many benefits for the debtor who needs financial relief.
Reject the lease: If you reject the lease, you normally don’t have to pay the past due rent and you’re also not obligated to continue paying rent. When a tenant rejects the lease, the lease will become part of the assets that are liquidated and the tenant will no longer be bound by the terms of the lease. The back rent would be discharged at the end of the bankruptcy case but you have to leave the rental property.
Assume the lease: If you accept the lease agreement, you can stay in your apartment or house long term but you must become current with all money owed to the landlord. The tenant will be given 30 days to deposit the back rent payment with the court. If the tenant fails to become current, then the landlord can continue with the eviction.
Florida Evictions and Bankruptcy lawyer
If you’re a tenant facing eviction, the automatic stay could be just what you need. It is hard to win an eviction case by yourself as the rules and procedures for getting the stay is quite complicated. If you really want to keep your rental, contact our Florida bankruptcy lawyer for help. Our lawyers will work diligently to provide resolutions that help you get back on track and decide the best actions for your future.