Throughout the pandemic, there has been a national ban on evictions. However, the Supreme Court struck down the current version of the ban in a decision last week, which sets the stage for evictions to resume.
Hundreds of thousands of tenants owe back rent (rent arrearages) to their landlords, and may be facing eviction soon, with the expiration on the eviction ban. According to an analysis by Goldman Sachs, an estimated 750,000 U.S. households will be evicted later this year.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a debt repayment plan, available to individuals or married couples with regular income who owe less than $1,257,850 in secured debt and less than $419,275 in unsecured debt.
The requirement to have regular income is a forward looking analysis, meaning that prior unemployment is irrelevant; but you must have future income sufficient to pay the necessary amounts into the Chapter 13 Plan.
When filing a Chapter 13 bankruptcy case, the attorney and debtor prepare and file a Chapter 13 Plan, which summarizes items to be repaid over the course of a 3-5 year repayment plan. This will typically include a portion of the attorneys fees which do not need to be paid fully in advance, repayment of car loans (often on more favorable terms than stated in the contract), and payments sufficient to cure certain arrearages including mortgage arrearages, back taxes, and rent arrearages. Some debts may continue to be paid directly (like ongoing monthly rent payments to your landlord) while others will be paid via a single monthly payment to the Trustee, who will then disburse the payments to claimants as outlined in the Plan.
Rent Arrearage Can Be Cured Through Chapter 13
For someone who is now able to stay current on future monthly rent payments, and repay their rent arrearages over time, Chapter 13 can provide much needed relief. The filing of the bankruptcy will stop a pending eviction action, but timing is very important.
If an eviction judgment has not yet been entered, a Chapter 13 Plan can propose to resume regular rent payments, and cure the arrearage as part of the Chapter 13 Plan payment.
However, if an eviction judgment has already been entered, there are much more stringent requirements:
1.) You must pay a deposit of the next month’s rent into the Court at the time of filing. This will allow you to stay in the rental for 30 days
2.) To remain in the rental after the 30 days, you must also cure the balance owed to the landlord as stated in the eviction judgment, within that 30 days.
So, curing an arrearage is much more difficult, and has to be done very quickly, where a landlord has an eviction judgment already entered in a state court eviction proceeding. Where that process has not yet resulted in a judgment, curing the arrearage can be done more affordably through the Chapter 13 Plan.
Chapter 13 does not allow you to extend a lease beyond its stated term. In order to continue renting after the expiration of your lease, you will have to come to terms with your Landlord and enter into a new lease or a renewal of your existing lease, specifying the new term. But, working proactively to cure a default and catch up on amounts owed to your Landlord will improve your ability to continue renting and avoid eviction.
How Can a Lawyer Help With Bankruptcy?
Steinhilber Swanson LLP assists you with all aspects of your case from filing through discharge. We are the team you can trust for high-quality and experienced legal services personalized to your needs.