Tenants and Bankruptcy

Few events are more frustrating to a landlord than tenants and bankruptcy. The uncertainty of whether the tenant will pay outstanding rent, compensate for utilities and late fees, and leave the property can be infuriating.

Originally acquired as a source of revenue generation, the property now serves as free housing for a delinquent tenant. Despite the seemingly helpless outcome of a bankruptcy filing, a landlord should know there are still options on regaining possession of his property, as well as receiving some payments, even when a tenant declares bankruptcy.

What Happens When a Tenant Declares Bankruptcy?

The bankruptcy begins when the tenant files a Petition in the Bankruptcy Court. Upon the filing of a Petition, any legal proceeding between the landlord and tenant immediately freezes. This abrupt halting of the landlord-tenant dispute, known as the automatic stay, remains in place until either the bankruptcy court permits for it to resume or the bankruptcy proceeding completes.

Even if the landlord has already won a lawsuit, obtained a judgment for possession to reclaim his property, and has coordinated with a local constable to evict a tenant, the automatic stay proibits any further action. The tenant gets to stay until one of the two conditions above occurs.

While the automatic stay remains in place, the landlord should consider his options in conjunction with a real estate attorney. The petition will specify what type, or Chapter, of bankruptcy the tenant has filed. A landlord’s options depend on the type of bankruptcy the tenant has filed. In nearly all cases, a residential tenant will file in either Chapter 7 or Chapter 13 bankruptcy.

Tenants and Bankruptcy: Chapter 7

In Chapter 7 bankruptcy, the tenant surrenders his assets to a trustee. The trustee determines which of the tenant’s creditors gets paid from those tenant’s assets. The trustee generally liquidates the assets and ascertains the compensation each creditor receives.

The trustee pays creditors with secured claims with proceeds from collateral and then pays unsecured claims. As obligations to the landlord under a lease are usually unsecured, landlords typically fail to receive any payment of outstanding rent, late fees, or utilities when a tenant enters Chapter 7 bankruptcy.

The landlord may still get paid, however, if the tenant assumes the lease in bankruptcy. Under the Bankruptcy Code, the tenant must, within 60 days of filing his petition in Chapter 7, indicate whether he intends to either assume or reject the lease.

If the tenant agrees to the lease, he must maintain current rent payments and provide adequate assurance that he will pay all outstanding monies to the landlord within a reasonable amount of time. The tenant, in turn, can stay in the property while he pays the landlord under the terms of the lease.
Should the tenant fail to make such payments or provide the needed assurances, the landlord may file a motion with the Bankruptcy Court for relief from the automatic stay. A real estate lawyer can help you determine when, and if, to file a motion.

If the Bankruptcy Court grants the motion, the automatic stay terminates, and the landlord may return to state court to remove the tenant from the property.

If the tenant rejects the lease, he is no longer obligated to perform under its terms, such as paying rent. The landlord may try to obtain relief of the automatic stay from the Bankruptcy Court if the tenant refuses to vacate the property. After filing the petition, the Bankruptcy Code provides that the tenant rejects the lease if he does not assume it within 60 days.

Tenants and Bankruptcy: Chapter 13

With a Chapter 13 Bankruptcy, the tenant-debtor attempts to restructure his debt and pay his creditors based on a payment plan. This payment plan, which the Bankruptcy Court must approve (or confirm), should include the tenant’s proposal on paying the landlord any outstanding rent and costs.

Unsecured creditors, like a landlord, may even receive payment. Unlike a Chapter 7 case, the debtor maintains control over his assets instead of having the trustee liquidate them.

In Chapter 13, the tenant has until the time the Bankruptcy Court judge confirms the payment plan, rather than the 60-day deadline in a Chapter 7 proceeding, to either assume or reject the lease. If the tenant drags his feet and fails to meet his lease obligations while the plan confirmation remains pending, the landlord may ask the Court to confirm the plan sooner or seek relief from the automatic stay.

A tenant may propose to pay the landlord only a fraction of the agreed-upon rent spread over a series of several months while maintaining possession of the property. The landlord, however, may seek relief from the automatic stay to re-obtain the property and seek monetary damages in state court. In the event you would like to seek relief, it’s best to consult with a real estate attorney near you.

Tenants and Bankruptcy: Chapter 11

While individual tenants typically enter bankruptcy under Chapter 7 and 13, some may file under Chapter 11. Typically, business entities file under Chapter 11. In Chapter 11, the tenant-debtor will file a restructuring plan and follow the same deadlines to assume or reject the lease as in a Chapter 13 case.

Like Chapters 7 and 13, the tenant’s failure to comply with a lease (such as timely paying rent) provides the landlord a basis to seek relief from the automatic stay. Commercial property tenants filing under Chapter 11 have different deadlines to file a plan of reorganization. They also have separate timelines for assuming or rejecting the lease.

Judgment Collection in Pennsylvania. Why is it so hard?

While obtaining a favorable judgment results from prolonged and costly efforts, collecting a judgment is arguably even more arduous.

Clients are often puzzled and even disappointed to realize that winning a case merely earns them a judgment in their favor. But when it comes to judgment collection, it’s another matter. So, they’re left asking what the point of months of litigating was? What was the point of all the confrontation? All the expense of hiring a litigation lawyer?

For example, a plaintiff or an aggrieved party who initiates a lawsuit can spend months, even years, litigating to obtain relief for incurred damages. Or a homeowner can toil in court for months trying to evict a delinquent tenant who has failed to pay rent. A company, too, can fight and fight for compensation when a former business partner refuses to honor a contract.

Litigation plows on, with seemingly no end in sight. Finally, after what seems like half a lifetime, the court schedules a trial, and the plaintiff appears in court against its adversary. The plaintiff argues his case, and after a tense trial, wins the case. The plaintiff is thrilled to learn that the relief he sought months, even years prior, is imminently obtainable. Clients tend to believe that the moment the jury (or judge, if a bench trial) announces a verdict in their favor, they are just minutes away from walking out of the courthouse with a check in their hand.

Unfortunately for those clients, nothing could be further from the truth.

Judgment Collection Differs Greatly from a Verdict

The party assessed the judgment (known as the judgment-debtor) often takes great lengths to avoid relinquishing assets to the successful litigant (known as the judgment-creditor). So, what does a judgment creditor do next, after spending considerable time, money, and resources, when it finally wins a lawsuit?

First, it is critical to understand that a verdict is different from a judgment. Pennsylvania law recognizes that a judgment is an official entry of a ruling or decision of the trial judge upon the docket.[1] You can collect on a judgment, not on a verdict.

Because a judgment and verdict are different, it is critical that the judgment-creditor “convert” a verdict or other determination of the court, which finally determines the parties’ rights and obligations, into a judgment. This action requires filing a “Praecipe to Enter Judgment” with the county’s Prothonotary, where the verdict was rendered. Only then can the judgment-creditor begin to collect on his judgment.

Attaching Liens to a Judgment Collection

Next, the judgment-creditor must ascertain where the judgment-debtor keeps his property. A judgment acts as a lien against property owned by the judgment-debtor. That lien only applies, however, to where the judgment is filed.

If the trial judge enters a $5000.00 judgment in Montgomery County, but the judgment-debtor owns a house in Bucks County and has no other property, then the judgment-creditor may never obtain the $5000.00 owed to him. In this example, the judgment-creditor must transfer the judgment from Montgomery County, where it was initially entered, to Bucks County, where the judgment-debtor’s property lies.

When the judgment-debtor attempts to sell his house in Bucks County, a title search will alert prospective buyers to the $5000.00 judgment, and the judgment will remain attached to the house until paid or satisfied. The judgment-creditor may transfer the judgment to any county, though it makes the most sense to transfer the judgment to a county where the judgment-debtor possesses property.

The judgment-creditor may continue to apply liens against the property until the amount of the judgment is satisfied. A judgment-creditor looking to transfer judgments to other counties should know that each county has its filing requirements and fees. If an overzealous creditor is not prudent, he may accrue filing fees that total the same amount of the judgment!

Filing a Writ of Execution

Once the judgment-creditor has determined where the judgment-debtor keeps his property, he can enlist the respective county’s Sheriff to assist in seizing the judgment-debtor’s assets, including bank accounts and other personal articles. The county Sheriff has the authority to seize bank accounts and hold sales over confiscated real estate.

Utilizing the Sheriff’s Office requires filing a Writ of Execution with the county Prothonotary, who then signs the Writ of Execution. The signed Writ of Execution, along with a fee, is then sent to the Sheriff.

The judgment-creditor must describe in detail within the Writ of Execution the property to seize, such as money, personal property, or real estate.

To better determine the amount, location, and other information regarding the judgment-debtor’s money, the Pennsylvania Rules of Civil Procedure permit the judgment-creditor to engage in “discovery in aid of execution.” [2] The judgment-creditor can take the deposition of any person, including the judgment-debtor or any representative of the bank (or other financial institution which holds the judgment-debtor’s funds), known as the garnishee. Discovery in aid of execution can be taken anytime after judgment, including before the Prothonotary approves the Writ of Execution.

Interrogatories to the Garnishee

The judgment-creditor may also consider issuing written discovery to the garnishee, known as “Interrogatories to the Garnishee,” to obtain more information regarding the judgment-debtor’s monetary assets.[3] The judgment-creditor can serve the Interrogatories to the garnishee whenever the Writ of Execution issues.[4] The garnishee then has twenty days under Pennsylvania law to provide the judgment-creditor with written answers.[5]

Note that though the judgment-creditor can use these legal tools to garnish a bank account, the garnishing of wages is generally not available in Pennsylvania. Only in some very narrow exceptions can a judgment-creditor garnish a judgment-debtor’s wages. The judgment-creditor should be aware of this when planning on how to collect his judgments.

If the judgment-debtor is cash-poor, the judgment-creditor can instruct the Sheriff (by way of a properly authored Writ of Execution) to levy against the judgment-debtor’s personal effects or real estate. The Sheriff can take an inventory of the personal property available and schedule a sale of the assets, which is open to the public, a few weeks thereafter.

If the judgment is substantial, such as tens of thousands of dollars, then attaching a judgment lien against the judgment-debtor’s house may be an option. However, the costs associated with securing a judgment to real estate can cost the judgment-creditor hundreds, if not thousands of dollars.

Further, the Sheriff typically only holds real estate sales at regular intervals, even as infrequently as every other month. It could take a judgment-creditor just as long to collect on his judgment as it did to get the judgment in the first place.

In any scenario, the circumstances surrounding a judgment and how to collect on it are never the same for any two judgment-creditors. A judgment-creditor looking to collect should contact a litigation lawyer to discuss the nuances of his case, what types of relief are available, and how to obtain that relief.

Careers

As a successful law firm for over 100 years, High Swartz can attribute many of its achievements to a dedicated, hard-working team. Our law offices have cultivated a workplace where individuals can advance their careers and develop long-lasting relationships.

We seek hard-working, dedicated and client-focused attorneys and administration ready to take their careers to the next level. If you are interested in adding your talents to our team, contact our law offices at recruiting@highswartz.com. Please find below a list of our current openings.


Open Positions

Estate Planning Attorney – Associate – Norristown Office

High Swartz’s Norristown Law Office is seeking an Estates attorney. Successful candidate will have 7-10 years experience in estate planning, administration and litigation.

This is an outstanding opportunity for a motivated individual to grow their practice in estates, while having the ability to offer their clients other legal services within our general practice firm. Interested candidates should know that in addition to offering competitive salary and benefits packages, we reward top performers for origination as well as working attorney receipts, and allow our attorneys to work both in person and remotely, as the work process dictates.

If you are interested in adding your talents to our team, contact our law offices at recruiting@highswartz.com

Requirements

  • JD – licensed to practice law in Pennsylvania
  • 7-10 years of related legal experience
  • Proficiency in computers, especially in a remote environment
  • Proficiency with Microsoft Suite and case management/time and billing software

Real Estate/Municipal Attorney – Associate – Norristown Office

High Swartz’s Norristown Law Office is seeking a Real Estate/Municipal attorney. Successful candidate will have 7-10 years of legal experience with a specific focus in township/municipal law and zoning and tax appeals in the Montgomery, Bucks, Delaware, Chester and Philadelphia Counties.

This is an outstanding opportunity for a motivated individual to grow their practice in estates, while having the ability to offer their clients other legal services within our general practice firm. Interested candidates should know that in addition to offering competitive salary and benefits packages, we reward top performers for origination as well as working attorney receipts, and allow our attorneys to work both in person and remotely, as the work process dictates.

Requirements

  • JD – licensed to practice law in Pennsylvania
  • 7-10 years of related legal experience
  • Proficiency in computers, especially in a remote environment
  • Proficiency with Microsoft Suite and case management/time and billing software

If you are interested in adding your talents to our team, contact our law offices at recruiting@highswartz.com


Summer 1L Robert E. Slota Diversity Program

Every year, High Swartz participates in the Montgomery Bar Association’s Robert E. Slota Summer 1L Diversity Program. This summer internship experience provides rich and rewarding opportunities for 1L students. But more importantly as High Swartz sees it, is an opportunity to provide important real-world insight to law students. If you have any questions or would like to be considered, please contact Nancy Walsh at at 215-896-6970 or nancy@tbdnowllc.com.

High Swartz’s Statement in Support of Juneteenth

Although Juneteenth may not be a household term, it represents an extremely important date in the history of our country.

High Swartz celebrates equal rights and understands that education and solidarity are important on this day and every day.

What is Juneteenth?

Juneteenth is a combination of 2 words – June and Nineteenth, or June 19th, which is the day that Americans recognize the emancipation of slavery in the United States. Although many may not be aware of the holiday or have only recently heard of it, recognition dates back to the year after slavery was abolished on June 19, 1865. On this date, Union Army General Gordon Granger announced that slavery was abolished in Texas.

Although President Abraham Lincoln’s Emancipation Proclamation abolished slavery in slave states over two and a half years earlier, enforcement relied on the presence of Union troops in those areas. Even two Union Border States, Delaware and Kentucky still legally practiced slavery up until the ratification of the thirteenth amendment to the Constitution abolishing slavery nationwide. Texas, being the farthest state from the Union army’s impact made it difficult to enforce the law. It was the arrival of the army in Texas that effectively ended the practice in southern states.

Is Juneteenth a national holiday?

Update: In 2021, President Joe Biden signed into law the national observance of Juneteenth, or June 19th as a federal holiday. Holiday recognition by the U.S. government is rare, making Juneteenth only the 11th date acknowledged in history. The last holiday recognized was Martin Luther King Jr. Day in 1983.

Over the years, legislation had been introduced multiple times to declare Juneteenth as a national holiday. Juneteenth was officially made a state holiday in Texas in 1980 and in 2020 in Virginia, New York, and New Jersey made the date a paid day of leave for state employees.

Temporary Restraining Orders – What are the Options in New Jersey?

Domestic violence in New Jersey can include anything from serious physical violence to harassment as it is defined under the statute. When there is an allegation of domestic abuse in New Jersey, a victim can seek the protection of the Court. This is done by applying for a temporary restraining order. You can consult with a family law attorney for support with the process.

When there is an emergency need for protection, temporary restraining orders are often entered on what’s referred to as an ex parte basis. This means that the person seeking protection tells the Judge why they need a restraining order and the Judge, without hearing from the other side or reviewing evidence, decides whether to issue a temporary restraining order.

The judge has issued the temporary restraining order. What happens next?

Once a temporary restraining order is issued, it has to be served on (or handed to) the party who has been named as the defendant. Temporary Restraining Orders typically prohibit the other party from having any contact, direct or indirect, with the person protected by the order. If there are firearms those will have to be surrendered to the local police. And if the parties are living with one another, the temporary order may require the other party to leave the home.

What happens to the children?

Where children are involved, the temporary order may also affect parenting rights and the defendant may temporarily lose parenting time. Because these prohibitions are put in place without giving the other side an opportunity to respond, courts are required to conduct a hearing shortly after the entry of the temporary restraining order (usually within a week to 10 days).

I heard of Final Restraining Orders in New Jersey. What are they?

A final restraining order in New Jersey lasts until it is vacated by the Court, which means that there is no clear end date for a final restraining order . For the party seeking a final restraining order the threshold questions are two-fold:

  1. Was an act of domestic violence committed?
  2. Is there an ongoing need for protection?

If the answer to both these questions is yes, then a final restraining order is granted. If the answer to either question is no, then the temporary order is vacated.

What happens to Domestic Violence offenders in New Jersey?

New Jersey maintains a central registry of domestic violence offenders so once a final order is entered, the party found to have committed an act of domestic violence will be registered. This can have a negative impact on their ability to continue working and can prevent the person from being hired for certain types of jobs.

Will a restraining order show up on a background check in New Jersey?

On a routine background check in New Jersey, a restraining order will not show up because it is treated as a civil (non-criminal) matter. If a more thorough or extensive background check is run, there is a possibility the order will be found.

Is there anything more amicable than a temporary restraining order?

Sometimes, for any number of reasons, parties will decide that rather than going to a trial in front of a Judge and seeking a final order, they would rather reach an agreement on their own to resolve the restraining order. In those instances, New Jersey allows for the parties to reach an agreement for Civil Restraints which may apply regardless of whether they are married or unmarried.’

In short, civil restraints are an alternative to a final restraining order. They must be entered into by agreement, because that the Court cannot impose civil restraints. In some situations, civil restraints can be a good, less restrictive, option to avoid a final restraining order.

How do you file for Civil Restraints in New Jersey?

An agreement for civil restraints cannot be entered under the domestic violence docket (the court record where the Restraining Orders are lodged). Therefore, there must be another docket to enter the record of the Civil Restraint agreement. Typically, this will occur under either the FM (divorce or dissolution) or FD (not related to a divorce or dissolution) docket. The key takeaway is in order to enter into Civil Restraints there must be a place to record the agreement. In those cases the domestic violence action is vacated.

What protection does a civil restraint agreement provide?

Civil Restraints can address many protections similar to a Final Restraining Order :

  • Prohibit contact between the parties
  • Allow one party to continue to have exclusive possession of the home
  • Prevent either party from posting any disparaging or damaging comments online
  • Address parenting time
  • Add other agreed provisions to minimize conflict

What’s the difference between a civil restraint and a restraining order?

The primary distinction between Civil Restraints and Restraining Orders is in how they are enforced. When there is a restraining order in effect, whether temporary or final, a violation of the restraining order is treated as criminal contempt resulting in, among other things, jail time, fines and/ or probation.. Therefore, police can be called in the event of a violation.

Civil restraint violations, on the other hand, are, civil (non-criminal)in nature. The Court can enforce its’ order. The plaintiff can file a Motion for Contempt and Enforcement, but the civil remedies through the Court are limited and will likely not include incarceration. The decision between seeking a final restraining order or agreeing to civil restraints is an important one and often depends on many case specific factors. A family lawyer near you can help you determine which route to go.

Civil restraints might accomplish the desired protections and alleviate the uncertainty of a trial or the potential negative consequences of a final order. That said, there are situations and circumstances where civil restraints would be inappropriate or insufficient. Whether a person is the victim of domestic violence or accused of committing an act of domestic violence, one should consult with a family law attorney that understands New Jersey family law when contemplating resolving a case by litigating for a final restraining order or agreeing to civil restraints.

Talk to a Family Law Attorney

With any matter involving domestic abuse or violence, it pays to seek counsel from a knowledgeable family law attorney near you. Our family law practice is well established and supports clients in Doylestown and Norristown, PA. We also offer assistance to clients in Cherry Hill, NJ.

Our law practice can support you all types of issues relating to family law. Get in touch. We’re here to help.

Divorce Checklist

Divorce is never easy, even more so if you have children involved. But if you’ve decided a divorce is the only way out, make sure you’re completely prepared.

Use this divorce checklist to ensure you’re taking the necessary steps to make the process as smooth as possible and reach the fairest outcome for everyone involved. If you have decided to proceed, talk with one of our family law attorneys. Here are some of the big items to check off your list:

Are you sure?

Have you taken every step possible to ensure a divorce is what you really want? Have you tried marriage counseling? Talked with friends? Talked with family? Once you begin the proceedings, it will be difficult to put things in reverse.

Even if you are certain, you might want to consider a collaborative divorce or a mediator where the two of you can work through the process as partners and not adversaries. With either option, a team of legal, financial, and childcare experts will work with you and your spouse to minimize the potential damage of a divorce proceeding.

Don’t go it alone. Find the right family law attorney.

Sure you can go online and attempt to handle the process yourself. But having someone by your side can make a big difference. At the very least, it will ensure nothing is left to chance. Take your time. Talk with friends, families, co-workers, and others who have filed for divorce. Get their recommendations on a family law attorney.

Keep in mind, you don’t have to hire the first family lawyer you talk with. It’s a good idea to meet with several divorce lawyers to find the right fit. It’s important that you feel 100% comfortable confident your family lawyer will be supportive and understanding. Equally important, you’ll want to make sure the family law attorney you select is an authority and has handled cases in the county where you are filing. In fact, the two of you will have to decide the venue to file for the divorce.

After working together with your family law attorney you decide it’s a bad fit, don’t hesitate to end your relationship and find another family lawyer. Do you approve your attorney’s negotiation (or litigation) style? Your divorce attorney needs to be a trusted advisor and advocate. The divorce process is already going to be difficult enough, you don’t want your family law attorney to create another obstacle for you.

get organized before getting a divorce

Get organized.

There’s a lot of documentation that’s required. So, start assembling all the records you can even before meeting with a family lawyer. Here are just some of the records you should have ready and available:

  1. Income-related documents including tax returns, pay stubs, financial statements, business expenses if either of you is self-employed, and any other information that helps establish both parties’ income and earning capacity.
  2. Real estate-related documents presenting joint or separately owned properties, property tax assessments, mortgage statements, and home equity loans.
  3. Financial documents including bank statements, savings accounts, checking accounts, investments, pension funds, 401K plans, IRAs, mutual, and retirement funds. You should include life insurance policies for any family member including loans or cash balances against those policies.
  4. Marital debt documents covering credit cards, loans, medical bills, and other debt held jointly or individually.
  5. Vehicle documents including titles and registrations for any car, truck, boat, equipment or other vehicles. Make sure you have the outstanding balance owed for those vehicles as well as the current value.

It’s best to create a balance sheet (summary of assets and liabilities) to establish a clear overview; highlight pre-marital or gifted assets. Doing so will help save legal fees and establish your financial goals from the divorce proceedings.

Stop spending

You’ll want to avoid impulsive spending to make sure you have the finances to file for divorce. Moreover, after you file, a judge could put a hold on your finances to prevent you or your spouse from buying, selling or disposing of marital property. This action prevents either of you from draining funds simply to spite the other party. If there is anything you want to buy or sell, make sure you do it in advance of any divorce proceedings.

Make a plan for a place to stay

Are you going to move out? Is your spouse going to move out? If it’s you, where are you going to live? You could elect to remain under the same roof during the divorce process. Just make sure that will be a comfortable situation and not create any undue stress or worse. If you have children, you cannot take them with you without approval of your spouse or the court. (See below.)

If you elect to move out, make sure you have the financial wherewithal. Create a budget for yourself and stick to it. You’ll also want to make sure you continue to receive mail. Have your mail forwarded to your new address or set up a post office box. You may also want to make sure you take any personal items that have meaning … you might lose them or have them tied up for quite some time as the divorce plays out.

new relationships after divorce

Be careful about relationships

In Pennsylvania, you can file for a no-fault or fault divorce. As such, a relationship outside of your marriage can be used to establish fault. Spending on the relationship can become a major point of contention during the divorce process. Even if you’re already involved with someone, get advice about whether to avoid flaunting that relationship until your divorce is finalized.

What about the kids?

The news about your divorce will be shocking and painful enough for your children. So, make sure you have a solid plan in place to help them through the process. How are you going to break the news to them? The first issue you may face in court or negotiations will address their custody and child support.

Pennsylvania implanted new child custody laws a few years ago. You’ll want to review those laws and their impact on your family lawyer. Barring extending circumstances, a judge will award shared legal and often shared physical custody. As a result, you’ll need to determine a schedule for where your children will live. That schedule can become complex if you elect to move to another state. Do your best to arrive at a plan in advance. It will make things easier for you during the divorce proceedings.

The more you’ve taken the time to address this checklist, the better prepared you’ll be to handle the stress of your divorce. Equally important, you’ll have the documentation and clarity you need to work effectively with your divorce lawyer.

It’s not going to be easy. But you’ll get through it. A divorce checklist isn’t going to answer all of your questions. So if you are looking for a divorce lawyer near you, give us a call at 610-275-0700. We have law offices in Norristown in Montgomery County and Doylestown in Bucks County PA. We also have an office in Cherry Hill, New Jersey.

One of the reasons, we became family lawyers is to help ease families through situations like this. You won’t just be getting a family law attorney. You’ll be getting a partner to help you through things.