Can My Landlord End My Lease Just for Filing Bankruptcy?

 Posted on February 06, 2017 in Automatic Stay

Your landlord CAN’T evict you for filing bankruptcy. A lease provision which allows for eviction upon bankruptcy filing is unenforceable.

Federal Bankruptcy Law and Lease Termination

Federal law does not allow your landlord to terminate your lease just because you file a bankruptcy case. U.S. Bankruptcy Code Section 365(e)(1) says:

an... unexpired lease of the debtor may not be terminated or modified... at any time after the commencement of the [bankruptcy] case solely because of a provision in such... lease that is conditioned on—

(B) the commencement of a case under this [bankruptcy] title

In other words, once you file bankruptcy the landlord can’t end the lease just because the lease agreement says the landlord can end the lease when you file bankruptcy. That provision in the agreement is legally unenforceable.

For Example

Let’s assume your lease agreement contains something like the following sentence:

“Tenant is in default of this Agreement if Tenant fails to pay rent on time, or if Tenant files bankruptcy. Whenever Tenant is in default, Landlord may terminate this lease.”

You file a bankruptcy case, and your landlord tries to evict you based on the lease agreement’s language above. But you can’t be evicted on that basis because that provision of the lease agreement is legally unenforceable.

What If My Lease Agreement Does Not Refer to Bankruptcy?

When you file a bankruptcy case through the help of your bankruptcy lawyer, the automatic stay immediately kicks in. The automatic stay stops, or “stays,” the collection efforts of your creditors, including your landlord.

The automatic stay prohibits your landlord from starting or continuing of any legal or direct action against you. This includes “any act to collect, assess, or recover a claim against the debtor... .” Section 362(a)(6) of the Bankruptcy Code. This prohibited act or action includes an eviction proceeding.

The automatic stay also does not allow your landlord to “obtain possession of... or to exercise control over” your property. Section 362(a)(3).

Your “property” includes both tangible objects and less tangible interests. It includes “all legal and equitable interests... in property as of the commencement of the [bankruptcy] case.” Section 541(a)(1).

That includes your right to occupy your rental property. The automatic stay stops your landlord from taking away your right to your rental.

What If I’m Behind on My Lease Payments?

Your landlord can’t end your lease just for filing bankruptcy, but what if you are in default in other ways? That depends on a number of factors. In many situations you CAN still stay in your rental even if you’re behind. And filing bankruptcy can help you do so. In our next blog posts we’ll look into various ways that filing a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts” can help.