Chapter 7 bankruptcy offers relief to individuals burdened by insurmountable debt, whether from credit cards, medical bills, payday loans, or utility expenses. This form of bankruptcy allows qualifying individuals to eliminate unsecured debts, such as credit card balances, while deciding about secured debts, like auto loans and mortgages.
A common concern for many eligible for Chapter 7 bankruptcy, particularly those who lease homes or vehicles, is how their lease agreements will be affected during the bankruptcy process. Continue reading to understand more, and contact Winterbotham Parham Teeple, a PC at 800.400.9000 to consult with a California bankruptcy attorney.
You can continue or terminate your auto lease or residential rental agreement when you file for bankruptcy. However, the final decision isn’t entirely yours. The bankruptcy trustee overseeing your case can choose to void any lease agreement they consider unfairly diminishing the value of your bankruptcy estate. In practice, though, it’s rare for vehicle and residential leases to be canceled by the bankruptcy trustee. After all, leaving you without a place to live or a way to earn a living doesn’t benefit anyone.
Unfortunately, some individuals have attempted to use bankruptcy to avoid eviction. This has become increasingly challenging since enacting the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. If your landlord has already obtained a judgment allowing them to repossess the property due to unpaid rent, your lease agreement is invalid and not included in the bankruptcy.
This means the automatic stay does not protect it, and your landlord can proceed with eviction without seeking approval from the bankruptcy court. Nevertheless, you can still persuade the landlord to halt eviction proceedings by settling overdue rent and prepaying future rent.
Filing for bankruptcy triggers the automatic stay, a critical benefit. During this period, creditors, including your landlord, cannot act against you without special approval from the bankruptcy court.
However, your landlord can request the court to lift the automatic stay to initiate eviction proceedings, primarily in rent arrears. If the eviction is based on property endangerment or illegal drug usage on the premises, the landlord doesn’t need court approval; they can simply submit certification to the bankruptcy court. The eviction process will proceed if you fail to file an objection within 15 days.
As long as your lease agreements are manageable and you comply with all terms, the bankruptcy trustee and your creditor or landlord will likely permit you to continue the contracts during your Chapter 7 bankruptcy in Los Angeles.
Before proceeding with your Chapter 7 filing, consult a bankruptcy attorney to address any questions or concerns. Contact Winterbotham Parham Teeple, a PC by calling 800.400.9000 today.