Upon commencement of a bankruptcy case, almost all non-bankruptcy proceedings against the debtor are subject to an automatic stay. The automatic stay prohibits not only the commencement of new actions against the debtor, but also prohibits the continuation of existing proceedings. Any individual or entity that willfully violates the automatic stay is halted by reimbursement of the actual monetary damages suffered by the debtor (including attorneys’ fees and costs) and, in certain circumstances, punitive damages.
Prior to the new bankruptcy law taking effect, a creditor who sought relief from the automatic stay to either begin a legal action or continue an existing legal action would have had to petition the bankruptcy court for relief. To be successful, the movant had to demonstrate cause (for example, lack of adequate protection in the property) and, with respect to real property, prove the debtor did not have equity in the property and the property was not necessary to achieve a successful reorganization.
Under the new bankruptcy law, the protection provided by the automatic stay with respect to the continuation of an eviction proceeding commenced prior to the filing of the bankruptcy involving residential property in which the debtor resides as a tenant would be greatly curtailed. If the debtor files a statement along with his or her bankruptcy petition (and serves a copy of the statement upon the landlord) certifying that: (i) under applicable non-bankruptcy law, circumstances exist that would, after judgment was entered, permit the debtor to cure the entire monetary default which gave rise to the judgment for possession; and (ii) the debtor deposited with the bankruptcy clerk any rent that would become due during the preceding 30-day period, then the debtor will obtain the benefit of the automatic stay during the 30-day period after the filing of his or her bankruptcy petition. The debtor must cure the monetary default that led to the landlord obtaining the judgment for possession within this 30-day period (and file a certification to that effect); otherwise, the automatic stay will not prohibit the landlord from enforcing the judgment for possession.
However, the landlord may file an objection to one or both of the debtor’s certifications. The bankruptcy court must hold a hearing within 10 days after filing the objection. If the bankruptcy court finds in favor of the landlord, the automatic stay will no longer apply to the landlord’s efforts to enforce the judgment for possession.
Furthermore, the automatic stay will not apply to an eviction that seeks possession of the residential property in which the debtor resides as a tenant under a lease as a result of the debtor’s endangerment of the property or illegal use of controlled substances on the property. Here, the landlord must file with the bankruptcy court a certification under penalty of perjury that: (i) an eviction action has been filed because of debtor’s actions; or (ii) that the debtor, during the 30-day period preceding the date of the filing of the certification, has endangered the property or illegally used (or allowed to be used) controlled substances on the property. Unless the debtor files an objection to this certification within 15 days after filing, the landlord may enforce the judgment for possession against the real property. If the debtor timely objects, the bankruptcy court must hold a hearing within 10 days to determine if the situation that gave rise to the landlord’s certification existed or has been remedied.
— Andrew Berenson