Will Bankruptcy Stop an Eviction?

In the face of financial hardship, many individuals and families struggle to meet their obligations, particularly when it comes to housing costs. This article delves into the specifics of whether filing for bankruptcy can halt a tenant eviction process.

Understanding Bankruptcy

First, let’s define what bankruptcy means. Essentially, it’s a legal process that helps individuals or businesses unable to pay their debts to seek relief and potentially start afresh. Bankruptcy proceedings can stop debt collection efforts, including eviction actions. However, it’s vital to understand how this process operates.

The Impact of Bankruptcy on Evictions

Bankruptcy can potentially halt an eviction, but the circumstances surrounding each case are critical. When you file for bankruptcy, an “automatic stay” is applied, stopping most collection activities, including evictions. However, there are exceptions to this rule.

Automatic Stay: A Closer Look

An automatic stay, as provided by the Bankruptcy & Insolvency Act (BIA), is a legal provision that halts creditors from collecting debts. This stay can stop an eviction order from your landlord for rent arrears.

The BIA, being a federal legislation, supersedes provincial legislation concerning landlords and tenants. So, when you file for bankruptcy, your landlord cannot evict you for rent arrears owing up to the date of filing.

Note: You should always consult with your trustee about your specific situation to get advice on what might be best for you.

Eviction Procedure

To fully understand how bankruptcy may affect an eviction, it’s crucial to understand the eviction process itself.

  1. Notice of Termination: Your landlord will first issue a notice of termination, stating the reason for eviction. For rent arrears, they must provide a 14-day notice if you pay rent monthly.
  2. Application for Eviction Order: The landlord will then apply to the Landlord and Tenant Board for an eviction order. You will receive a Notice of Hearing to review the application.
  3. Issuing of Eviction Order: The board may issue a notice for you to pay the rent arrears or vacate by a specific date. If you fail to vacate, the Sheriff may also issue a notice to vacate.

Can Bankruptcy Stop All Types of Evictions?

While bankruptcy can stop eviction due to rent arrears, it might not halt all types of evictions. For instance, if your landlord wants to renovate the property, sell it, or use it for personal reasons, bankruptcy won’t stop the eviction.

Landlord’s Responsibilities in Bankruptcy

When a tenant declares bankruptcy, the trustee will notify the landlord if you are in arrears with your rent. Your landlord can file a proof of claim for any arrears owing up to the date of filing. They can also request a creditors’ meeting.

Should You File Bankruptcy to Stop Eviction?

While bankruptcy can stop an eviction, it’s crucial to consider the potential repercussions. Filing bankruptcy to deal with rent arrears can strain your relationship with your landlord and is a one-time solution only.

However, if you’ve fallen behind on your rent due to other debt payments, dealing with all creditor arrears through bankruptcy can improve your cash flow, helping you stay current on your rent moving forward.

Moving Forward After Bankruptcy

If you choose to remain in tenancy after bankruptcy, be prepared to pay a per Diem for the remainder of the month post-filing and remain current on your rent after bankruptcy. Rents paid after filing can be directed applied to current rent only.

Conclusion

While bankruptcy can stop an eviction due to rent arrears, it’s not a decision to be taken lightly. It’s essential to fully understand the implications of bankruptcy and consider other debt relief options. Always consult with a financial advisor or bankruptcy trustee to make informed decisions regarding your financial future.

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