Ignoring your tenant’s bankruptcy stay can result in some very serious consequences. Any action you take against your tenant during an active bankruptcy stay is void. Therefore, if you tricked the Justice of the Peace into proceeding with an eviction trial and you won an eviction judgment, that eviction judgment is completely unenforceable.
These types of shenanigans can also prove to be quite costly. Violating a bankruptcy stay gives your tenant a civil cause of action against you. The tenant can recover actual damages, punitive damages, attorney fees, and costs. Let’s say your misrepresentation to that Justice of the Peace later led to your tenant’s forcible removal. Your tenant’s actual damages might include any damage to their personal property, moving expenses, even reimbursement for hotel stays. Your tenant’s attorney fees in such a case could easily run into the tens of thousands of dollars.
Oh, but there’s more! The Bankruptcy Court might impose its own fines against you. A Bankruptcy Judge can hold you in contempt for violating a bankruptcy stay. In 2011 a Florida bankruptcy Judge slapped Bank of America with a $12,500 fine when the bank violated only one stay.
Not sure what to do when your resident files for bankruptcy? Our TX real estate attorneys can help.