You served the eviction notice. You filed the eviction suit. Maybe you even have a judgment. Then your tenant files bankruptcy and everything stops. This is one of the most frustrating situations a landlord faces, and it happens regularly, particularly in commercial real estate during economic downturns.
The tenant is still obligated to pay rent. But you need to act quickly to protect your rights as a creditor.
The Automatic Stay and Eviction
When a tenant files a bankruptcy petition, the automatic stay immediately stops eviction proceedings in most cases. But the stay is not absolute when it comes to eviction, and the exceptions matter.
If You Already Have a Judgment for Possession
If you obtained a judgment for possession from the justice of the peace court before the tenant filed bankruptcy, the automatic stay does not automatically stop you from continuing to enforce that judgment. You may be able to proceed with the writ of possession without going back to the bankruptcy court first.
However, the tenant can temporarily delay even a post-judgment eviction by filing a certification with the bankruptcy court and depositing rent with the court, which gives the tenant up to 30 days to attempt to cure the monetary default. After that 30-day period, if the tenant has not cured, you can proceed.
If You Do Not Yet Have a Judgment
If the eviction suit is still pending, or if you have not yet filed, the automatic stay applies and you cannot proceed until the stay is lifted or the court permits the eviction to continue. Contact us immediately.
The Tenant’s Obligation to Pay Post-Bankruptcy Rent
The tenant does not stop owing you rent when they file bankruptcy. Rent that accrues after the bankruptcy filing date is treated as an administrative expense, which carries priority over general unsecured claims and must be paid ahead of them. In a Chapter 11 case, the debtor is specifically required to keep performing under the lease, including paying rent, until the lease is either formally assumed or rejected by the court.
Pre-bankruptcy rent, meaning what was owed before the filing, is a general unsecured claim that must be asserted through a proof of claim. That claim may receive little or nothing in a Chapter 7 liquidation.
Assumption or Rejection of the Lease
When a tenant files bankruptcy, the unexpired lease becomes part of the bankruptcy estate. The debtor must eventually decide whether to assume or reject the lease.
If the lease is assumed, the tenant must cure all past-due rent in full and provide assurance that future rent will be paid. Assumption is favorable for the landlord.
If the lease is rejected, it is treated as a breach occurring immediately before the bankruptcy filing. The landlord has a claim for damages against the bankruptcy estate, but it is generally an unsecured claim. Rejection also ends the tenant’s right to occupy the property, and you can pursue recovery of the space.
For commercial leases, there are specific court-imposed deadlines within which the tenant must assume the lease or it is automatically rejected. We monitor these deadlines for landlord clients.
What to Do Immediately
Verify the bankruptcy filing in the federal court records, and note the chapter, case number, and petition date. Stop any pending eviction proceeding unless we have confirmed the post-judgment exception applies. Document all unpaid rent, both pre-petition and the amounts accruing after the filing date. File a proof of claim before the applicable bar date for the pre-petition arrears. And call us.
In this section: Proof of Claim · Automatic Stay Relief · Reaffirmation Agreements · Plan Negotiation
Frequently Asked Questions
My tenant filed the morning of the eviction hearing. What do I do?
Stop and call us before doing anything else. Whether the automatic stay blocks your eviction depends entirely on where you are in the process. If you do not yet have a judgment, the stay almost certainly applies. If you have a judgment, you may be able to proceed, but only after we confirm whether the tenant has filed a certification to delay enforcement. Do not proceed without advice specific to your situation.
Can I change the locks after the bankruptcy is filed?
No. Self-help eviction is prohibited in Texas regardless of the tenant's bankruptcy status. Changing locks, removing the tenant's property, or cutting off utilities on an occupied space can expose you to sanctions from the bankruptcy court and a civil claim from the tenant. All eviction must go through the proper legal process.
Is the tenant required to keep paying rent during the bankruptcy case?
Yes. Post-petition rent is a current obligation. In a Chapter 11 or Chapter 13 case, the debtor is required to continue performing under the lease, including paying rent, until the lease is assumed or rejected. If the tenant stops paying post-petition rent, that is grounds for us to file for relief from the automatic stay so you can enforce your rights.
What if the tenant rejects the lease, do I have any recourse for lost rent?
Yes. If the lease is rejected, you have a claim for damages against the bankruptcy estate, typically calculated as the rent you lost from the rejection through the end of the lease term, subject to certain caps. This claim is filed as a proof of claim in the case. The recovery on that claim depends on whether the estate has assets. In a commercial Chapter 11 with assets, this can produce a meaningful recovery; in a no-asset Chapter 7, recovery may be minimal.
The tenant owes several months of back rent. Can I collect any of that?
Pre-petition rent arrears are a general unsecured claim in the bankruptcy case. You file a proof of claim for the amount owed, and you receive whatever the plan or the Chapter 7 liquidation provides for general unsecured creditors, which varies widely by case. Contact us and we will assess the specific case to estimate realistic recovery on the pre-petition arrears.
Can a commercial tenant use bankruptcy to get out of a long-term lease?
Yes. Rejecting a burdensome long-term commercial lease is a common use of the bankruptcy process by struggling businesses. A commercial tenant in bankruptcy can reject a lease that has years remaining and decades of rent remaining due. The landlord's damage claim is then capped under the Bankruptcy Code, regardless of how much rent was actually remaining on the lease. We help commercial landlords understand this exposure when a tenant files and advise on the best strategy for protecting the property and maximizing recovery.