Bankruptcy and Eviction

Bankruptcy, especially Chapter 7, has only one significant option when it comes to leases; the debtor in the bankruptcy filing can "reject" the lease, essentially breaking the contract and discharging the debt.

A recent issues that came up with one of my clients involved an eviction proceeding, and whether a bankruptcy proceeding can stop the eviction.  The answer is, of course, "maybe," and it depends on when the bankrutpcy case is filed.

The key event in an eviction proceeding is the "order of possession."   The order of possession is what allows the landlord to take possession of the property, and directs the county sheriff to remove the tenant and the tenant's belongings from the property. 

What is stopped or "stayed" by the bankruptcy case is determined by 11 U.S.C. 362, which is known as the Automatic Stay. 

11 U.S.C 362(a) provides as follows:

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

[...]

So, at first blush, it appears that the eviction proceeding would be stayed, since an eviction proceeding is a judicial proceeding to enforce a claim against the debtor, namely, a lease.

However, 11 U.S.C. 362(b) provides some exceptions to 362(a), namely section 22:

The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay— [...]

(22) subject to subsection (l), under subsection (a)(3), of the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor;

Landlords get a specific exception to enforce orders of possession; they do not have to seek relief from teh bankruptcy court.

So, that leaves us with two possible scenarios, depending on whether the bankruptcy case is filed before or after the order of possession in the eviction case.

Bankruptcy filed before eviction proceeding / order of possession.

If the bankruptcy is filed before the order of possession, then the eviction proceeding will be stayed until either (1) the bankruptcy case ends, or (2) the landlord seeks relief from the bankruptcy court by filing a motion for relief from the stay.


Bankruptcy filed after eviction proceeding / order of possession.


If the bankruptcy case is filed after the order of possession, then under 11 U.S.C 362(b)(22), the automatic stay does not apply and the landlord is free to continue the eviction proceeding.