Effect Of A Tenant’s Bankruptcy On A California Unlawful Detainer Proceeding

Now that the state moratorium on evictions is essentially over, many renters are facing a mountain of debt that accrued during the pandemic. Some tenants will choose to file bankruptcy as a means to eliminate their debt and remain in the rental unit for as long as possible. This article discusses the implications of a tenant’s bankruptcy proceeding on unlawful detainer proceedings that are contemplated or already initiated by the landlord.

The Automatic Stay Resulting From A Bankruptcy Filing

The general rule is that the filing of a bankruptcy petition results in an “automatic stay” of a pending unlawful detainer proceeding. In essence, the automatic stay is a court order that bars the landlord from commencing or moving forward with an eviction action. When the stay is in effect, landlords cannot serve Notices to Pay or Quit, sheriffs must cease enforcement efforts and the tenant is entitled to remain in the unit until the automatic stay is lifted.

The rule for unlawful detainers in California is a residential tenant’s bankruptcy filing does not stay eviction under an unlawful detainer judgment obtained before the filing of the bankruptcy. 11 USC section 362(b)(22). In other words, if the landlord has already obtained a judgment against the tenant in an unlawful detainer action, the tenant’s post-judgment filing of a bankruptcy petition will not result in an automatic stay. In that situation the landlord will still be able to obtain a writ of execution returning possession of the property back to the landlord.

The landlord may petition the bankruptcy court for relief from the automatic stay and, if relief is granted, the unlawful detainer may proceed. In addition, if the landlord seeks only to repossess the property, the automatic stay may not apply. A landlord may not, however, seek to enforce any other portion of the unlawful detainer judgment, such as money damages, against the tenant and the tenant’s bankruptcy estate. In addition, the landlord can avoid the automatic stay if he files a certification with the bankruptcy court attesting to the fact that the tenant is endangering the property or is illegally using controlled substances on the property. The landlord can also avoid the automatic stay by proving the bankruptcy was filed in bad faith.

There are other protections afforded by the bankruptcy court to discourage abuses of the system and shield rental property owners from serial abusers of the bankruptcy court. For example, if the tenant files for bankruptcy within a year of having an active prior bankruptcy case dismissed, the automatic stay will automatically terminate without any further action after 30 days. Also, should the tenant filing for bankruptcy have two or more active bankruptcy cases dismissed within the past year, there is no automatic stay.

How Long Will The Tenant Be Able To Remain On The Property?

The answer will vary depending on local policies and procedures where the bankruptcy case was filed. The tenant may be able to stay in the rental unit anywhere from a few weeks to several months. This answer really depends on how quickly the landlord files a motion in bankruptcy court to relieve him of the stay and allow him permission to proceed with the eviction process. In other words, the landlord must “lift” the stay before proceeding with the eviction by obtaining a court order to that effect.

Ceasing Collection Efforts

Another important point to remember is that landlords are precluded from contacting the tenant in any manner designed to collect a debt once the bankruptcy case has been filed and the automatic stay has been triggered. Doing so would violate the automatic stay, and expose the landlord to potentially significant penalties as a result. Accordingly, as soon as the landlord becomes aware of the bankruptcy filing, he or she must immediately halt any collection or dispossession efforts.

Help on any of these issues is simply a phone call or click away. Please contact Lynx Legal Service with any inquiries you may have at 888-441-2355 or info@lynxlegal.com.