Can Filing Bankruptcy Stop An Eviction in New York City Housing Court?
New York City is one of the most expensive cities, and also one of the most densely populated cities, in the world. As a result, it’s not uncommon to find individuals who have fallen behind on their monthly rent payments and are now facing eviction. Many New Yorkers are asking can filing bankruptcy stop an eviction in New York City Housing Court?
For many, the prospect of filing for bankruptcy is a stressful and complex situation by itself. But, for those in financial distress that are also facing an eviction lawsuit, seeking relief in the bankruptcy court may be the only option for stopping eviction legal proceedings.
In this article, we’ll briefly discuss how evictions work in New York City. We’ll then turn to the bankruptcy laws and how they operate, regardless of whether someone files bankruptcy under chapter 7 or 13. We will look at actions a person can take to get some protection from eviction, including outside of an active bankruptcy. Finally, we will touch on what remedies a landlord may have available when a tenant files bankruptcy. Ultimately, understanding the facts can help individuals make the best decision for their particular situation.
How Does Eviction Work in New York City?
In New York City, eviction cases are filed and heard in the Civil Court – except ejectment cases, which are eviction cases between family members, are brought in Supreme Court – where there is a specialized Landlord-Tenant section. Eviction cases are not traditional cases, like a breach of contract case or a personal injury case, but rather designated as a special proceeding under state laws.
Broadly speaking, to start an eviction case in New York City, a landlord will generally have to serve some kind of notice. In most cases, this notice will either be a written notice of rent demand, or a written notice terminating a tenancy. After the notice is served, if the tenant does not cure the issue (in the case of a rent demand, pay the rent that is owing; in the case of a notice terminating tenancy, curing the alleged default or vacating the unit), the landlord may then file a notice of petition and petition in court. These are the papers that start the actual court case.
The eviction process moves along in court and, if the landlord can make her case, she will be awarded a “judgment of possession.” A judgment of possession is, at its core, a court order that the landlord can recover the space at issue – the ultimate goal of almost any eviction action.
Once the judgment of possession is entered, a warrant of eviction gets issued, and a City Marshal can then carry out the actual eviction.
Nonpayment case for rent as debt
One type of eviction case a landlord may bring is for nonpayment of rent. A nonpayment case is a case in which the landlord alleges the tenant owes past due rent, and if the tenant does not pay the arrears, the landlord wants possession of the premises. A tenant can end a nonpayment case by paying off the alleged arrears. Basically, if the tenant pays the back rent it owes (which the tenant can possibly negotiate with the landlord in housing court to settle the case with a payment plan), the case will be resolved. In a nonpayment case, a landlord may seek a money judgment in addition to a judgment of possession, which may be reported on the tenant’s credit report and can impact credit score.
Holdover case for possession or material breach of a lease
The other type of eviction case that is generally brought is a holdover case. A holdover case is one in which the landlord alleges that tenant does not have an enforceable lease-based interest in the premises (either because the lease expired or there is an alleged breach of the lease). Unlike nonpayment cases, which are generally about the money, holdover cases are about possession of the premises. A tenant cannot resolve a holdover case by paying unpaid rent if the landlord can prove her case. Similar to the nonpayment case, however, the parties are free to negotiate and try to work out a settlement in court.
How does bankruptcy work?
Unlike eviction cases, which are based on state and city laws, bankruptcy proceedings are based on federal laws. Generally, to inure the benefit of bankruptcy protection, a person will file a bankruptcy petition along with several schedules with the bankruptcy clerk office. In most cases, immediately after a voluntary petition is filed, an automatic stay goes into effect, which stops and stays most enforcement actions against the bankruptcy debtor (the person who filed the case) and their bankruptcy estate (basically, all of the property interests of the person).
A bankruptcy trustee is assigned to review and investigate each bankruptcy case, to look for personal property that may not be exempt, evidence of fraud, or other issues with the bankruptcy filing. Presuming there are no issues with property, fraud or the like, and assuming no objections from creditors, a discharge order will eventually be entered enjoining any collection activity of prior debts against the debtor.
The Automatic Stay
The automatic stay is a legal tool that bars most collection and enforcement efforts against the debtor and debtors, and goes into effect immediately upon the filing of the voluntary petition (unless it is an exception under the bankruptcy code). That is, the automatic stay applies to all different kinds of cases and proceedings, unless it is specifically excluded in the bankruptcy laws. It also goes Into effect regardless of whether the person files a chapter 7 bankruptcy or a chapter 13 bankruptcy. The intention is to give a debtor a brief period of bankruptcy relief to get their affairs in order and have the bankruptcy estate administered. The automatic stay is automatically imposed when the voluntary petition is filed and remains in effect until the bankruptcy is dismissed or the bankruptcy discharge order entered.
How can I stop an eviction in New York City
While eviction proceedings are intended to be speedy cases, there are 2 main ways a tenant can try and stop the eviction process in New York City Housing Court:
- order staying eviction obtained in Housing Court: a tenant can generally request a stay of an eviction directly from the housing court judge. This may be early in the case, during the trial, or even after. a judgment of possession is issued by filing an order to show cause.
- order from another court of competent jurisdiction: a tenant may also be able to stop an eviction in New York City by getting a court order from a court that has the authority to issue such an order. This may be from the Appellate Division (the appeals court) if the tenant believes the trial judge was incorrect, or another court, such as a bankruptcy court.
How does filing bankruptcy affect eviction proceedings in New York City?
Now that we know the bankruptcy court has the power to issue an order stopping an eviction, it would be helpful to understand how this bankruptcy relief works in relation to an eviction case.
Section 362 of the bankruptcy law is where the automatic stay is found, and it states that a petition filed under the bankruptcy laws,
“operates as a stay, applicable to all entities, of-
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;”
This statute then goes on to list circumstances in which the bankruptcy protection of the automatic stay would not apply. The exception relevant to a residential eviction case is found in section 362(b)(22) of the bankruptcy law and states,
(22) subject to subsection (l), under subsection (a)(3), of the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor.
As a result, the bankruptcy code makes a clear distinction of how it impacts eviction proceedings:
If the bankruptcy case is filed before a judgment of possession is entered, then the automatic stay applies.
If the bankruptcy case is filed after a judgment of possession is entered, then the automatic stay does not apply, unless the debtor-tenant files a certification in her bankruptcy case that, under state law, there are circumstances where she can cure the entire monetary default (the past due rent) that gave rise to the judgment of possession, and that the tenant has deposited rent that would become due in the 30 days after the filing with the clerk of the bankruptcy court.
Can a landlord proceed with the eviction process if a tenant has filed for bankruptcy?
Bankruptcy can be a difficult and confusing time for landlords and tenants alike. When a tenant has moved forward with a bankruptcy filing with an eviction action pending, the landlord must understand the type of bankruptcy that was filed in order to determine if they can proceed with serving an eviction notice. Depending on the type of bankruptcy, a tenant’s rental payments may or may not be covered by an automatic stay, which could affect whether or not the landlord can proceed with serving an eviction notice. It is important to understand these nuances when dealing with bankruptcy and evictions so that both parties are aware of their rights and obligations. It’s also critical to know whether an eviction judgment of possession has been entered before the debtor-tenant filed for bankruptcy protection.
Unfortunately for landlords, the reality is that even if a landlord obtained a judgment of possession prior to tenant filing a bankruptcy petition, whether a chapter 7 or chapter 13 bankruptcy, a city marshal is unlikely to proceed with an actual eviction because they do not want to potentially be held liable for violation of the automatic stay. Thus, once a tenant files for bankruptcy relief and a city marshal is receives notice, they will stop the eviction process, even if the bankruptcy was filed after an eviction judgment was issued.
For a landlord to proceed with the eviction action after a tenant has filed for bankruptcy protection, a landlord may file what’s known as a motion for relief from stay in the bankruptcy proceeding. A motion from relief from stay is a request to the judge for an order declaring that the automatic stay does not apply to the landlord (because she is excepted under the bankruptcy code), or if the automatic stay does apply to the landlord, that there are circumstances present that the judge should allow the landlord to proceed with the eviction lawsuit.
Contact the Law Office of Richard Kistnen whether you are a landlord or a tenant that needs the help of a bankruptcy attorney to guide you through the eviction judgment
For many New Yorkers, bankruptcy may be the only option to stop an eviction. But, filing bankruptcy is a lengthy, complicated, and expensive process. It’s important to understand the process and consider other options. Many New Yorkers are asking can filing bankruptcy stop an eviction in New York City Housing Court. The short answer Is yes, it can, but there are nuances. The bankruptcy law applies to stop evictions where a judgment of possession has not been issued. If a judgment of possession has been issued, the bankruptcy filing may still stop the eviction If, under state law, the tenant has the right to cure and pay the past due rent that gave rise to the judgment of possession.
Most, if not all, city marshals, will not proceed with the eviction lawsuit to avoid any possible violation of the automatic stay. This means a landlord will likely have to file a motion for relief from stay in the bankruptcy court to proceed with the eviction action, regardless of whether a judgment of possession was issued or not when the tenant files the bankruptcy case.
Whether you are a landlord or a tenant, having the guidance of an experienced bankruptcy attorney, such as Richard Kistnen, Esq., walk you through the intersection of these two cases is important. Whether you are a tenant that might be considering a bankruptcy case to stop an eviction, or if you are a landlord and need guidance with a motion for relief from stay, speaking with the Law Office of Richard Kistnen, an experienced bankruptcy lawyer as well as eviction lawyer, can help you map out your best option. If you would like to know more about the how bankruptcy affects your eviction case, book your consultation with the Law Office of Richard Kistnen today.