Chapter 7 Bankruptcy and the Current Eviction Moratorium

Do you owe thousands of dollars in unpaid rent due to COVID19? Read below to see how Chapter 7 bankruptcy can help discharge past due rent. It’s expensive to live in the state of Michigan since rent takes a hefty chunk of an individual’s total income. Therefore, it is not unusual for many Michigan tenants to be behind in their rent while some teeter on the verge of eviction. To make matters worse, evictions are currently soaring nationwide due to the coronavirus crisis.

The COVID-19 pandemic and the subsequent economic impact has already affected millions of Americans and thousands of renters in Michigan are at risk of homelessness due to inability to pay their rent. Fortunately, tenants are temporarily getting protection from eviction for non-payment of rent under various emergency government measures.

Federal CDC Eviction Moratorium

Because of the unemployment and financial struggles due to the pandemic, there was a statewide ban on housing evictions in Michigan that came into effect on April 1^st 2020. This moratorium on evictions has been extended five times over the course of six months but ends July 31st.

The last Michigan eviction moratorium, which expired on September 1^st, has been extended to December 31^st under the Centers for Disease Control and Prevention (CDC) recent order. The 2^nd stimulus package extends this moratorium until January 31, 2020. The CDC federal moratorium puts a temporary ban on landlords taking action against tenants for non-payment of rent and other utility service charges and was change to July 31st 2021.

So Michigan families who can’t pay rent due to Covid-19 related financial hardships such as layoffs, loss of household income or huge out-of-pocket medical expenses can continue to get protections under this CDC eviction moratorium.

Criteria: Tenants who are seeking relief under the federal moratorium must meet the criteria outlined by the CDC. To qualify for protection, the tenant:

• Must expect to earn no more than $99,000 or $198,000 if filing a joint return in 2020
• Has received an economic stimulus check under the CARES Act@
• Was not required to report any income to the IRS in 2019
• Has sought all available government assistance to make their rental payments

Limitations of Eviction Moratorium

The moratorium looks like a panacea for all problems but this is not true. The most important thing about the eviction moratoriums is that they are temporary and do not forgive or reduce rent payments. This means, unfortunately, the moratorium will not help renters pay rent but it just delays the threat of eviction and there are some loopholes in it that put certain renters at risk of removal.

This federal protection is quickly disappearing and, it is already expired. You are already several months behind on rent and continue to accumulate debt during this period and when this temporary halt of evictions end on December 31, 2020, your landlord may demand payments in full that you’re not made prior to and during the temporary halt.

Without the extension of eviction ban and other federal financial support, many renters could be facing homelessness when the eviction moratorium expires on July 31 (now extended by one more month under the new coronavirus stimulus deal, lasting through January 31, 2021). On top of that, most landlords will not even consider a tenant with a previous eviction record.

Housing is undeniably a basic human necessity and those who are evicted often lose their jobs, possessions, community connections, and even health. If you are depending on the anti-eviction provisions of the CARES Act to protect you from being evicted from where you’re living, then it would make more sense to consider filing for bankruptcy.

Using Chapter 7 Bankruptcy to Stop an Eviction for Rent Arrears

Filing Chapter 7 bankruptcy can put an automatic stay on eviction actions and also prevent the landlord from collecting any past due rent that you owe. You can receive a discharge of past-due rents by filing a Chapter 7 bankruptcy, but you can still be evicted. So if you plan on moving but only looking to get relief from the past due rent you owe, then filing Chapter 7 is the best option for you.

In general, the automatic stay can provide relief to tenants by preventing the landlords from beginning or continuing with eviction proceedings. But in 2005, the bankruptcy law was revised that give landlords more power to evict tenants who file for bankruptcy, despite the automatic stay. There are two situations where bankruptcy will not stop an eviction:

1. The landlord obtains a judgment of possession of the property before the tenant filed for bankruptcy
2. The landlord claims that the tenant is endangering the property or illegally using drugs

Waiting too long to file for bankruptcy can limit your power to retain control over the situation and comes with the consequence of losing your home. So in order to stop an eviction through bankruptcy, it is critical for you to act immediately by filing your case before the landlord gets an order of possession. Please call Firebaugh & Andrews for a free consultation 734-722-2999