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Does Automatic Stay Stop Eviction

Does Automatic Stay Stop Eviction.  YES  Can a Landlord evict his tenant after the tenant files a Bankruptcy.  YES.  However, the Landlord needs be exceptionally careful.   Under Section 362 of the Bankruptcy Code, the Tenant’s lease of the premises is cover by the Bankruptcy Automatic Stay.  This is a global stay on all activity of the Bankruptcy Debtor (our tenant).  To get relief from the automatic stay and be able to proceed with the eviction requires the landlord to either wait for the debtor file his statement of intention of either assuming or rejecting the lease.  The  Debtor (tenant) has 30 days from the filing of the petition to file his statement of intention.  To obtain this statement of intention soon and force the debtor (tenant) to either assume or reject the tenancy, the landlord should proceed with a motion under Section 365(d) of the bankruptcy code to obtain an order of the court requiring debtor to file his statement of intention by a certain date.  If the lease is rejected under Section 365(a), it is no longer part of the bankruptcy estate and landlord can immediately start eviction process.  The eviction should seek past due rent and money damages from the date of bankruptcy filing forward into the future along with expenses post petition.  The past due rent and expenses incurred prior to the petition date should be either a claim in that bankruptcy or if a no-asset case, these claims will be discharged in the bankruptcy.

What to do if the debtor has assumed the lease but is not paying.  At this point, this would require a motion for relief from the stay for inadequate protection.

A landlord of the debtor is attempting to terminate debtor’s leasehold for nonpayment of rent but has failed to do so at the time of filing. The automatic stay of section 362(a)(3) applies either on the theory that the leasehold interest is property of the estate or on the theory that the leased premises are property in the possession of the estate. The landlord should proceed under section 365(d)(2) by asking the court to order the debtor to assume or reject the lease within a specific period of time. If the property is nonresidential real estate as to which the debtor is the lessee, section 365(d)(4) will apply rather than section 365(d)(2). Colliers Section 38.02[2] …

Obviously, when a lease is rejected under section 365(a), the landlord should not be put to the additional expense of then seeking relief under section 362(d) to be able to re-enter the premises. Colliers 38.02 [3]

Chapter 7 debtor needs to file statement of intention under Section 521 of the code within 30 days of filing the petition, Bankruptcy Code Section 521.

Opinion:

Debtor must file statement of intention with regard to the lease within 30 days of the filing of the Chapter 7 Petition, Section 521 Bankruptcy Code. If debtor does not file statement of intention with regard to the lease within 30 days, The landlord should proceed under section 365(d)(2) by asking the court to order the debtor to assume or reject the lease within a specific period of time. As a practical matter, this motion should be filed immediately after the filing of the petition to ensure that an order of the court is issued requesting dismissal of the Chapter 7 case if this statement of intention isn’t filed timely or requesting that debtor assume or reject sooner than 30 days.

Pre-Petition Eviction Case is stayed as a practical matter until the statement of intention is filed. If Debtor does not vacate the premises after statement of intention is filed timely or pursuant to order, nothing should stop the state court proceeding for forcible entry and detainer for possession only. There can be no money damages for past due rent or expenses prior to the date of filing of the bankruptcy. However, a claim for past due rent and other damages can be made for post-petition rent and expenses.

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