How long does eviction (with Tenant bankruptcy) take in Memphis?

[Sam Liu]

I have an investment property in Memphis. It's my first out-of-state investment property. Unfortunately, the tenant (who is the first tenant for my first out-of-state property) stopped paying rent after 3 months. He actually never paid on time in that 3 months.  So we started the eviction process on Dec 6th last year. 1.5 months later, we got the judgement that we could get the possession of the house. Just two days before we could get the possession, the tenant filed bankruptcy. He timed everything very well. Either he is a professional tenant or an attorney was helping him. So we had to stop eviction and wait for the next rent due date - Feb 5th. 

Early Feb, my PM said he asked his attorney to ask the bankruptcy court to lift the automatic stay. Now it's March. The attorney still say that they haven't heard back from the court but see the bankruptcy to be dismissed completely on that March 21st. My PM said we might need to wait until then to start another eviction process. At first, they were saying this bankruptcy court will take up to 30 days. 

I feel it's been really dragging on. Assuming that we have to wait until 21st, it will take our PM's attorney 4 months to start another eviction process, which can easily take another 1.5 month. So the whole process will be about 6 months. 

Have you had eviction experience with tenants filing bankruptcy? How long did it take you to complete the process? 

[Douglas Skipworth]

Hi, @Sam Liu.

I am so sorry that your first out-of-state property now has a tenant who is in bankruptcy.  As you know, bankruptcy is almost always a terrible situation for the landlord. @Curt Davis and I spent a little time during his podcast last year talking about that very subject.

Below is the written information that our eviction attorney provides to our owners about bankruptcy.

(I sure hope your out-of-state experience goes up from here.)

Bankruptcy

If the tenant files bankruptcy, the eviction process is subject to the automatic stay in the bankruptcy case, and if an eviction action has been filed, it will be dropped from the State Court’s docket to be reset if the tenant’s bankruptcy case is dismissed.

When a bankruptcy case is filed, we usually negotiate a Consent Order Conditionally Terminating the Automatic Stay. In that instance, any rent that was due prior to the filing of the bankruptcy petition is put into the tenant’s bankruptcy plan and is treated as a secured claim to be paid at 100%. The Consent Order also provides that, if the tenant is late in paying rent for the month following the month in which the bankruptcy petition is filed, the automatic stay is lifted and the eviction case can be reset in State Court or filed, if the tenant files bankruptcy prior to the filing of the eviction action.

In some instances, we can file a Motion to Lift the Automatic Stay. This is only used in a few instances primarily because of the amount of time it takes to get the Motion before a Judge. The Motion is first set for a 9:00am hearing, which is not before the Judge, to see if the parties can resolve the matter. If the matter is resolved, it is most likely by a Consent Order similar to the one described hereinabove. If the matter is not resolved at the 9:00am setting, the case is reset for a 10:00am setting which is before the Judge. It usually takes four weeks to get the Motion in front of a Judge. The cost to file the Motion for Stay Relief is at least $176.00.

The Consent Order is more time efficient and more economical than filing the Motion. It also provides a means for the owner to continue receiving ongoing rent during the bankruptcy case.