BANKRUPTCY CAN DELAY EVICTION EVEN AFTER JUDGMENT
The automatic stay provisions of the United States Bankruptcy Code, § 362, are designed to protect a debtor’s property so that it may be reorganized or liquidated by a bankruptcy trustee. If a tenant has a lease that is in default, the Bankruptcy Code gives the tenant or the trustee the opportunity to cure the default and preserve the value of the lease or the tenancy.
However, when there is no lease or default to cure, the delay and opportunity to cure provided by the Bankruptcy Code is pointless. The extra time will never result in the debtor or the trustee preserving any value for creditors, since there was no value to preserve. Nevertheless, many residential tenants, often advised by unlicenced, “eviction advisors,” file bankruptcy to stall the eviction process. Without proper legal advice, many debtors do not understand the long-term consequences of filing a bankruptcy petition. They often do not discharge very much debt while only delaying the eviction process by as little as a week. On the other hand, landlords can be subject to long delays and great expense without the debtor obtaining the relief for which the Bankruptcy Code was designed.
In 1984, Congress attempted to work on this problem by adding Bankruptcy Code § 362(b)(10), which exempted from the automatic stay “any act [to obtain possession] by a lessor … under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during ‛a bankruptcy case.” This solved the problem for commercial leases that had exprired. But It did not address the problem of non payment of rent or residential leases.
Accordingly, the California legislature went further in 1994 by enacting Code of Civil Procedure § 715.50, which provides that “a writ of possession issued pursuant to a judgment for possession in an unlawful detainer action shall be enforced…without delay, notwithstanding receipt of notice of the filing by the defendant of a bankruptcy proceeding.” The California Court of appeal upheld this statute in the case of Lee v. Baca, 73 Cal. App. 4th 1116 (1999). “The unlawful detainer judgment extinguishes the residential tenant’s interest in the property and that a postjudgment bankruptcy filing does not affect the landlord’s right to regain possession of his property–because it is not, at that point, property of the tenant/debtor’s estate.” Thus, the eviction would proceed regardless of the tenant’s bankruptcy.
This all changed in March, 2002, when the Bankruptcy Court for the Central District of California decided the case of In re Buttler 271 Bank.Rptr. 867 (Russell). The Court found the California Code of Civil Procedure § 715.050 was unconstitutional and unenforceable because it was preempted by the federal bankruptcy law. The Court decided that a debtor in possession of real property had an interest that was subject to the automatic stay provided for by the Bankruptcy Code.
That ruling, issued by a single bankruptcy judge in Los Angeles, holds that a landlord is still required to obtain an order from the bankruptcy court if the tenant files a bankruptcy petition before the sheriff can actually remove that tenant from the premises.
However since the ruling has yet to be adopted by an appellate court, it is not president. The Los Angeles County Sheriff is not treating it as the law. Instead the Sheriff is giving landlord’s the option of proceeding with an eviction even if a bankruptcy is filed after a judgment for eviction by a state court. The who landlord elects to proceed with the eviction after the bankruptcy could be exposed to being held in contempt depending upon the Bankruptcy Judge and future appellate rulings.
