If you are at risk of deportation, this last resort could save you time: Lawyer

Tenants facing eviction should consider filing for bankruptcy in order to gain more time to make a financial decision, said George Tadross, a consumer finance and tax lawyer.

“[Declaring bankruptcy] takes between, I would say, three to six months, which may not seem like a lot of time, but to be honest with you, it’s a godsend, ”Tadross said. This extra time can give people threatened with eviction time to sort out their finances and decide which direction they want to proceed, he added.

Bankruptcy is a legal deposit that is declared when a person is unable to meet their unpaid debts. There is a legal process to qualify for bankruptcy, in which filers must meet certain criteria related to income, the value of personal assets, and debt levels. Declaring bankruptcy can help people get off their debt, but it can also lower credit scores and make future loans more difficult to obtain.

“Consult with a local attorney who knows the laws,” said Tadross, who practices in Philadelphia. “Each jurisdiction is a little different.

End of moratoriums, increase in evictions

In 2021, a the federal moratorium on evictions has been extended to relieve both landlords and tenants after COVID-19 destabilized the economy and increased unemployment. The Supreme Court ultimately overturned this policy, but several national and local deportation moratoria remain in place. Problems arose after much of the federal money ultimately failed to reach targeted people in a timely manner. Until the end of July 2021, only $ 4.7 billion of the $ 47 billion allocated by Congress had reached homeowners and tenants, the Treasury Department reported in August.

Today, more than a year after the start of the pandemic, many Americans are still behind on their housing obligations. About 10 million Americans, or 14% of American renters, are in arrears with rent payments, according to Center data on budget and policy priorities. Eviction rates could increase in the near future, especially for low-income renters and people of color.

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Moratoriums and stimulus payments have helped lower the rate of people filing for bankruptcy, Tadross said. “There have never been fewer bankruptcy filings in recent memory than in the last year and a half, again, because these moratoriums and benefits and things like that have been extended to people. “

While there are risks associated with bankruptcy, Tadross noted, some tenants may be too quick to dismiss it as a viable option because of its stigma.

“I understand … Nobody really wants to be in this position,” he said. “But you have to look at the consequences of doing nothing, even putting aside the harshness of an addiction [or] be kicked out on the street. Someone is doing nothing and has tens of thousands of dollars in debt and [don’t] want to file for bankruptcy. Well… it’s just going to keep increasing.

Bankruptcy can act as a buffer between impending evictions and tenants who need more time to figure out their next financial move. Those three to six months can be crucial, Tadross pointed out, and sometimes make the difference between a life riddled with debt and a path to financial stability.

“Each month, REITs [real estate investment trusts] report other defaults to credit bureaus, ”he said. “And it’s going to get harder and harder to dig out of that hole.”

For those looking to file for bankruptcy, it is crucial that they do so before eviction judgments are made, Tadross stressed.

“If they file for bankruptcy and want to get that extra time, they have to do it before the deportation order,” he said. “Once they get that eviction judgment, the automatic stay of bankruptcy will not help them, because now it’s the owner who seeks to take possession. And it’s no longer like a real loan or… a collection activity that is protected by an automatic state. So they really, really can’t wait until after that.

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on twitter @IFanusia.

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