As Eviction Controls Ease, Consider the Possibility of Bankruptcy
Emergency Rule of Court 1 temporarily prohibits evictions of all types in California. But that prohibition will end sometime. It has to because landlords are still facing mortgages regardless of whether tenants pay or not. If tenants don’t pay, the property may well be foreclosed.
California is considering a number of measures to avoid the potential onslaught of evictions. That includes a freshly amended, leadership-backed Senate measure that generally bars landlords from evicting tenants during a state of emergency, allows landlords and tenants to negotiate payment plans that could give renters years to repay and lets property owners claim future tax credits for unpaid rent.
One alternative seemingly not considered by most large law firms analyzing “Acts of God” or “Impossibility of Performance” defenses to rent payment for tenants, is that of bankruptcy. If you can get past your perceptions of stigma, you may recognize this as a viable and possibly preferred solution.
If you are a tenant, bankruptcy can offer you a respite not only from rent, but many other obligations as well as you reorganize your business affairs.
If you are a tenant
If you are a tenant, bankruptcy can offer you a respite not only from rent, but many other obligations as well as you reorganize your business affairs. By sheer happenstance, a new Subchapter V of Chapter 11 of the Bankruptcy Code was enacted Fall of 2019 to make reorganizations easier and less costly for smaller business enterprises. And, some bankruptcy courts have already considered the issue of “Acts of God” as landlords seek payment of rent as a condition to the tenant staying in the premises during reorganization. Tenants may well rather be in front of a bankruptcy judge than a state court judge who may have come from the ranks of district attorneys or a large law firm, and who may not fully understand or be sympathetic to excuses from paying rental obligations.
If you are a landlord
If you are a landlord, you may face the bankruptcy issue from two perspectives: either you may consider it as a method to avoid a non-judicial foreclosure from your lender; or you may have to deal with bankruptcy if your commercial tenant files for bankruptcy and wants more time to make up past rent through a multi-year reorganization plan.
Law Offices of Brian Irion is a debt relief agency that helps businesses and people under the Bankruptcy Code. We also help creditors dealing with debtors and trustees in bankruptcy!