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Landlord Bankruptcy Representation

What if My tenant Files Bankruptcy?

Tenants enjoy immediate protection from U.S. Bankruptcy Courts when they file bankruptcy. When a tenant files bankruptcy, you – as a landlord – are deemed to be one of your tenant’s creditors. It is extremely important that you follow the Bankruptcy Court’s rules. On misstep – even if unintentional – can result in hefty fines. The good news is that there is a way out of this. And landlord bankruptcy representation from a competent law firm is your answer.

My Tenant Filed Bankruptcy. What Do I Do?

“Tenant” and “bankruptcy” are two words no landlord ever wants to hear in the same sentence! Tenant bankruptcies are complicated.

Here are some questions we often get from our landlord clients who have bankrupt tenants:

  • How does a bankruptcy filing affect the eviction I just started?
  • Am I in trouble if I filed an eviction after my tenant filed bankruptcy?
  • If my tenant follows through with the bankruptcy, what happens to all of the unpaid rent?
  • What rights do I have as the landlord after my tenant files bankruptcy?
  • I’ve heard that bankruptcies can take years. Will my tenant be required to pay rent during this time?
  • Can I get my property back if the lease ends in the middle of my tenant’s bankruptcy?
  • What does it mean if one tenant files bankruptcy but her co-occupant spouse does not?
  • If an occupant not named on the lease files bankruptcy, are my rights still restricted?
  • Is there any way to have the tenant’s obligation to pay rent excused from the bankruptcy?

Not to worry! We’ve got the answers….

What the Automatic Stay Means to Landlords

The first thing a Texas Landlord needs to understand is that automatic stays are immediate. When your tenant hands her bankruptcy petition to the bankruptcy clerk, the automatic stay is in place as soon as the clerk’s stamp hits the paper. Your right to demand rent payments or demand your tenant move out of your rental property immediately ends. Your tenant’s consequences for not paying rent also come to a screeching halt.

If you started an eviction before your tenant filed for bankruptcy relief, the eviction court is legally required to halt the eviction process. Were the eviction court to proceed, the Judge in that case would be violating the automatic stay! It seems like a really unfair set of rules, particularly if the landlord was unaware of the bankruptcy stay. But our firm’s attorneys can nearly always help you get things right with the Bankruptcy Court. But if you knew about your tenant’s bankruptcy an continued to collect anyway? Uh-oh…. That’s often a matter of damage control. NEVER mess with your tenant after they file bankruptcy. Don’t even call your tenant!! Call your lawyer first.

Schedule a FREE CONSULTATION with our Landlord Bankruptcy Attorney

Plano TX | Dallas TX | Irving TX | McKinney TX

Call Us! (817) 383 4664

What Happens If You Ignore the Bankruptcy Stay

Ignoring the Bankruptcy Stay

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.

Schedule a FREE CONSULTATION today!

Call Us! (817) 383 4664