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Federal Eviction Moratorium Update

September 28th, 2020 at 7:00 am

The current federal eviction moratorium comes with a number of qualifications and conditions. Be aware of them. It’s a limited but helpful tool.

 

Our last three weekly blog posts have been about the new Agency Order temporarily stopping many residential evictions. This Order by the Centers for Disease Control and Prevention (“CDC”) went into effect on September 4, 2020. It expires on December 31, 2020, when all unpaid rent will be due and evictions can resume.

Three weeks ago we described this eviction moratorium. Two weeks ago we discussed how renters could get more benefit from the moratorium with a Chapter 7 “straight bankruptcy.” Last week we got into how Chapter 13 could help significantly more. This week we provide additional important practical information.

Exceptions to the Eviction Moratorium

The CDC’s evictions ban did not cover all possible evictions. As a renter you need to make sure that you qualify and take the right steps to avoid being disqualified.

First, as emphasized last week, you must complete and give your landlord a Declaration form to trigger the eviction ban. Otherwise you do not qualify for the moratorium.

Second, you sign that Declaration under penalty of perjury. If you are not truthful, you’d expose yourself both to criminal liability and to eviction. So make sure you meet the stated income and other qualifications.

Third, the Declaration requires you to make “timely partial payments” as much as you can afford. You can’t necessarily just stop monthly payments altogether. In fact “timely” indicates that you should try to make partial payments when the regular rent payments are due each month. But what determines whether and how much you can afford to pay? The CDC’s Agency Order says you must use your “best efforts.” The “partial payments [are to be] as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses.” This is all quite vague. But if you can afford to pay something and you don’t, your landlord has potential grounds to evict regardless of the moratorium.

Fourth, the Declaration makes you liable not just for rental payments, but also for “other obligations that I may have under my… lease agreement… .” This includes “fees, penalties, or interest for not paying rent…  on time… .”  These “may still be charged or collected.” Presumably this means landlords can collect these additional charges only after the moratorium expires, so starting January 1, 2021. But don’t lose sight of these add-ons—they can really add up.

Evictions for Other Reasons

The Agency Order states clearly that even if you otherwise qualify and deliver a truthful Declaration, your landlord could still try to evict you “for reasons other than not paying rent….”

Some but not necessarily all such reasons include:

(1) Engaging in criminal activity while on the premises; (2) threatening the health or safety of other residents; (3) damaging or posing an immediate and significant risk of damage to property; (4) violating any applicable building code, health ordinance, or similar regulation relating to health and safety; or (5) violating any other contractual obligation, other than the timely payment of rent or similar housing-related payment (including non-payment or late payment of fees, penalties, or interest).

85 Fed. Reg. 55,294 (Sept. 4, 2020).

You need to be mindful of these other reasons for eviction that defeat the moratorium. However, also note that landlords face a significant risk if they violate the Agency Order by trying to wrongfully evict you. These include significant fines ranging from $100,000 to $500,000 per event, and even possible imprisonment. These penalties should discourage frivolous attempts by landlord to evict with invalid justification.

Expired or Lack of Lease Agreement, Subtenants

Three common situations are not addressed directly by the Agency Order.

First, you may have signed a month-to-month lease agreement with a one-year term, but continued on after that one year. The landlord and you essentially assume that you both continue to be bound by the lease agreement. But legally it’s clearly expired. Assume you’re not paying rent because of the moratorium, but the landlord has somebody else who can afford the rent. Can the landlord evict you without violating the moratorium because you have no valid lease agreement? It’s certainly plausible.

Similarly, what if your lease agreement expires at the end of this month? Presumably the landlord is under no obligation to renew or extend the agreement. So he or she may be able to evict you in spite of the moratorium.

What about verbal lease agreements? Or month-to-month ones in which both parties can legally end that lease at any point. Seems like the landlord could have the right to end the agreement and evict in spite of the moratorium.

Finally, many people are subtenants who are not on the original lease agreement. So they don’t have a direct relationship with the property’s landlord. Similarly, a number of residents may live under a lease signed only by one of the housemates. If you don’t have renter’s rights because you are not the legal renter, the moratorium does not apply to you. If the renter on the agreement does something allowing the landlord to evict him or her, the moratorium will not likely help you.

Conclusion

The federal eviction moratorium gives you a potentially helpful additional tool during these intensely challenging times. But you have to act to qualify for it. And there are various conditions and exceptions you’ve got to be aware of.

In addition, the eviction moratorium is just one tool of many. It may best be used in conjunction with a range of bankruptcy tools. See a bankruptcy lawyer to find out how to use all the available legal tools to help you meet your goals.

 

Chapter 13 and the Eviction Moratorium

September 21st, 2020 at 7:00 am

Use Chapter 13 to catch up on back rent that piles up during the eviction moratorium, so that you can stay in your rental long term. 

 

Our blog post two weeks ago was about a recent federal order temporarily stopping certain residential evictions throughout the country. Check out that blog post to see who is covered and how to take advantage of this eviction moratorium.

Asserting Your Right Not to Be Evicted

Assuming you qualify, you must act to assert your right not to be evicted. This mostly means you need to print up, review, sign, and give your landlord a two-page declaration form. Here is that Declaration form.

The Declaration starts with a quick explanation for how to use it, then lists the qualifying conditions you must meet. You have to be truthful about qualifying for the conditions, so read those carefully. You sign under penalty of perjury. So, “you can be prosecuted, go to jail, or pay a fine if you lie, mislead, or omit important information.”

Also, every adult renter included on “the lease, rental agreement, or housing contract should complete” it. Then get it to your landlord.

Important: as broad and clear the moratorium may seem, it is being interpreted differently by different state and local judges. For example, some judges believe that landlords can’t file eviction lawsuits at all. Others believe that they can be filed and processed, with only the eviction itself stopped by the moratorium. See this New York Times article about these inconsistencies: How Does the Federal Eviction Moratorium Work? It Depends Where You Live.

The Challenge Created by the Moratorium

Let’s assume you qualify and deliver the Declaration to your landlord. The big problem with the eviction moratorium is that it is temporary. It expires on December 31, 2020. Just as big of a problem is that it does not forgive any rental payments whatsoever. So even if you do everything right, you’d owe a pile of rent money on January 1, 2021. (You’d owe the piled up rent earlier if you earlier reach the point when can afford to pay rent again.)

So let’s now assume that you could afford to start paying your monthly rent in January 2021. (Or at any point earlier.) What to do with the months of back rent you owe then?

One option: move somewhere else and forever write off (“discharge”) the back rent with a Chapter 7 “straight bankruptcy.” See our last blog post about that, and other possible ways Chapter 7 may help.

But the challenge is if you really want to stay in your rental long term. Chapter 7 does not give you a reliable legal mechanism to pay the unpaid rent. Is there’s a better solution?

The Opportunity Created by Chapter 13

At the heart of a Chapter 13 case is a 3-to-5-year partial-payment plan. You and your bankruptcy lawyer prepare and file this plan at the bankruptcy court. Here’s the court’s official Chapter 13 Plan form.

Just as in Chapter 7, under Chapter 13 you have to choose whether to “accept” or “reject” your rental agreement. If you want to stay in your rental you have to “accept” the agreement and say so in your proposed plan. See Part 6 (starting on page 6, titled Executory Contracts and Unexpired Leases) of the Chapter 13 Plan form.

The crucial benefit under Chapter 13 is that generally you can catch-up on the accrued late rent payments over time. The payment plan that you submit contains the terms of repayment of those accrued rent payments. You could theoretically stretch those catch-up payments over the 3-to-5-year life of your plan.

The real beauty of Chapter 13 is that once your bankruptcy judge formally approves your payment plan, your landlord is forced to accept your repayments terms.

Landlord Challenges to Your Terms

Your landlord could object to the payment terms, before your Chapter 13 plan gets court approval. But you have a number of advantages.

First, your filing of the Chapter 13 stops the landlord from being able to proceed with eviction. This is true even if the national eviction moratorium had expired by then. The “automatic stay” imposed by any bankruptcy filing stops virtually any eviction proceeding in its tracks, at least temporarily. So time is more on your side.

Second, the landlord has the burden of objecting. If your plan shows that you can resume regular rent payments and presents a reasonable schedule for catching up on the late payments, the landlord may decide to accept your proposal. The landlord thereby avoids paying out more attorney fees. Under your proposed plan the landlord gets rent payments every month starting right away. Your plan should give the landlord some confidence in getting the back rent paid. The alternative is losing it all, and maybe another few months of no rent payments if you’re forced out.

Third, if the landlord does object to what you and your bankruptcy lawyer propose, there is often room for compromise. You have a lawyer on your side to look out for your interests. You’d likely be able to amend your Chapter 13 plan to satisfy both sides.  

More Chapter 13 Advantages

The way Chapter 13 works is that usually you pay “general unsecured” debts only to the extent that you can afford to do so. “General unsecured” debts are ones like medical bills, most credit cards, and such. Most likely you will want to pay your rental arrearage ahead of your “general unsecured” debts. Indeed you’ll be forced to if you want to stay in your rental.

The nice thing is that in many situations the money you need to pay for the past due rent reduces the amount you pay on your “general unsecured” debts. That’s because you can only afford to pay a certain amount to all of your debts over the course of your case. Your budget dictates that amount. The catch-up rent in effect comes out of what you’d otherwise have to pay the “general unsecured debts.

Another Chapter 13 advantage is that you can often delay paying certain debts until you’re better able to do so. For example, you may be able to pay less monthly on the back rent for several months, then more later. This may be because you anticipate increase in income, such as when a spouse returns to work. Or it may be because you anticipate a future reduction in expenses, such as paying off a vehicle loan.

Finally, Chapter 13 is flexible in other ways. You’re not necessarily tied into your payment plan forever. Its terms can shift with your changing financial circumstances even after it’s approved by the court. Or if you change your mind about staying in your rental, you can amend the terms of the plan. Or you can even convert into a Chapter 7 case and likely discharge whatever you then owe to the landlord.

 

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