COVID-19 has been a threat to more than our health. It has also posed a threat to our finances. If you rent or lease your home, and if you are facing the possibility of being evicted, you should discuss your options – including bankruptcy – with a Chicago bankruptcy attorney.

Due to COVID-19, eviction filings by landlords will continue to be placed on hold in the State of Illinois through August 22, 2020, according to a recent announcement from the Office of Governor J.B. Pritzker.

Prior to that announcement, landlords were not permitted to file eviction cases through the end of June under COVID-19 Executive Order 37, issued back on May 29. However, no executive order has had the effect of relieving tenants from the obligation to make rent payments.

How was Executive Order 37 Extended?

The Governor’s most recent announcement extends Executive Order 37 and restricts – but only temporarily – the ability of a landlord to evict a tenant.

It aims to prevent a tenant’s loss of shelter due to COVID-19 while still requiring tenants to pay rent. It prevents any new eviction proceedings from being filed by landlords in Illinois through August 22, 2020.

However, Governor Pritzker’s order makes an exception allowing for the eviction of tenants who pose “a direct threat to the health and safety of other tenants, an immediate and severe risk to property, or a violation of any applicable building code, health ordinance, or similar regulation.”

What is Required to Evict a Tenant in Illinois?

The eviction process in Illinois involves several steps. It begins with a landlord having a five-day eviction notice served on a tenant. In Chicago, the next step involves a COVID-19 Eviction Protection Ordinance approved by the Chicago City Council in June.

The ordinance requires landlords in Chicago to allow a seven-day “cooling-off” period if a tenant responds to the five-day notice with proof that rent has gone unpaid for reasons related to the COVID-19 pandemic.

Landlords who conduct lockouts or engage in any type of retaliatory conduct against their tenants are in violation of the law and may be ordered to pay harsh fines.

If Eviction is Imminent, What are Your Options?

Bankruptcy is one option for tenants who are facing eviction, but it is not the only option, and if you are facing an eviction for nonpayment of rent, bankruptcy may or may not be the right option for you.

In all honesty, filing for bankruptcy can decrease – temporarily – a tenant’s credit rating, but maintaining your residence is more important than maintaining a good credit rating.

Once you have filed a petition for bankruptcy, the bankruptcy court issues an “automatic stay” that prevents an eviction process against you from starting or continuing. (The automatic stay also prevents other creditors from taking or continuing collection actions against you).

Can a Landlord Win an Exception to an Automatic Stay?

The automatic stay is a powerful legal tool. It provides an important time-out that can help a bankruptcy filer avoid an eviction, at least temporarily. However, a landlord can petition a bankruptcy court to make an exception that:

1. modifies the automatic stay on the grounds that the lease or rental agreement had expired prior to the bankruptcy filing; or

2. allows the landlord to file an eviction action or continue with a pending action

However, unless otherwise ordered by the bankruptcy court, the automatic stay remains in effect until a discharge of debts is granted or denied.

If You Face Eviction, When Should You File for Bankruptcy?

The safe step for a tenant is to file for bankruptcy before the expiration of the lease or rental agreement. However, a bankruptcy court judge has the discretion to deny a landlord’s motion to modify an automatic stay even if the bankruptcy was filed during an ongoing eviction process.

If you file a Chapter 13 bankruptcy – a “reorganization” bankruptcy – you and your Illinois bankruptcy attorney must develop a payment plan that satisfies your entire rental debt over a period of three to five years.

Your Chapter 13 payment plan must include paying everything that the landlord is owed. Otherwise, a landlord can ask the bankruptcy court to modify the automatic stay and allow the eviction to proceed because the payment plan does not protect the landlord’s interests.

The CARES Act May Help You

Illinois renters who are facing eviction and considering bankruptcy may benefit from the “CARES Act” (the Coronavirus Aid, Relief, and Economic Security Act) passed by Congress and signed into law by President Trump back in March.

The Act makes temporary changes to the bankruptcy laws. For example, when calculating your income for a bankruptcy filing, COVID-19-related payments from the federal government (like stimulus checks) are not included. That change to the law remains in effect through March 2021.

Tenants should understand that filing a petition for bankruptcy is a last resort. However, if you and your landlord cannot agree privately on a rent payment plan, and if eviction appears certain, speak to a Chicago bankruptcy lawyer before your landlord begins the eviction process.

Can Bankruptcy Discharge Rental Debt?

Eventually, bankruptcy can give you a “clean slate” financially, but the process is not easy. A Chapter 7 bankruptcy liquidates unsecured debts such as medical and credit card debts, but it may not help you pay off rental debt.

In almost every individual consumer bankruptcy case, the court will appoint a bankruptcy trustee who will have various obligations and powers.

The bankruptcy courts have held that in Chapter 7 bankruptcies, the right to discharge an unexpired lease resides exclusively with the bankruptcy trustee. Bankruptcy courts have also held that discharging “a debt in bankruptcy does not constitute payment of rental fees.”

Everyone’s situation is unique, but most tenants who face eviction should file for a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy. However, it is vital to discuss your own situation with a Chicago bankruptcy attorney before you make any final decision to file for bankruptcy.

How Will a Bankruptcy Attorney Help?

Again, bankruptcy may not be your best option for dealing with the possibility of eviction, but if it is, complex legal paperwork and financial documentation will be required, and even a simple mistake could cost you dearly. That is one reason why you must have the right attorney’s help.

You will also benefit from the experience, guidance, and insights that an Illinois bankruptcy lawyer will provide. You may have options apart from bankruptcy that you are not even aware of.

If you are facing the possibility of eviction in Illinois after Governor Pritzker’s executive order expires on August 22, the time to learn about your options – and the time to obtain personalized advice from a Chicago bankruptcy lawyer – is now.