Kentucky Moratorium on Eviction Hearings to Expire July 25, 2020

As many unemployed homeowners and renters know, there has been a moratorium against filing foreclosure or eviction cases in court since the start of the COVID-19 pandemic lockdown. However, that prohibition is starting to end. Because Lawrence & Associates Accident and Injury Lawyers, LLC practices bankruptcy law in Kentucky and helps save about one hundred homes every year, we’ve been paying careful attention to the Kentucky court system to see how they are handling foreclosures and evictions. The Kentucky Supreme Court issued an order that partially reopened courthouses starting June 1, 2020. Buried in this order are directions to the Kentucky state courts on how to process foreclosure and eviction lawsuits. Knowing what the state courts are allowed to do is critical to saving your home or apartment.

How the Kentucky Supreme Court Order Affects Renters

It’s important to know that Kentucky is still under a “state of emergency” due to COVID-19 and that there is no set date that this will end. However, the Governor could end the state of emergency at any time, and we don’t know how much notice we’ll get when that happens. Governor Beshear could make an announcement that the state of emergency will end in a day, a week, or a month. The Kentucky Supreme Court order says that all evictions can resume when the state of emergency ends or on July 25, 2020, whichever comes first. Some evictions can begin before then, but generally only if they are on commercial property or if the eviction is for some reason other than non-payment of rent. The order goes on to say that “…nothing in this Order shall be interpreted to suspend or otherwise excuse an individual’s duty to pay rent….” In other words, if you aren’t paying rent now then you’re living on borrowed time. The backlog of unpaid rent is piling up, and you have a maximum of seven weeks before that bill comes due.

How the Kentucky Supreme Court Order Affects Homeowners

If you own your home and are behind on mortgage payments, the situation is even more dire. The order allows judicial sales to begin again, effective immediately. A judicial sale is when a mortgage company gets a foreclosure judgment against you and the Master Commissioner sells your house to the highest bidder. The day of the judicial sale, the buyer is allowed to enter the house and change any locks on the doors. The judicial sale is a point of no return. Northern Kentucky counties – particularly Boone County, Kenton County, and Campbell County – have already put out scheduling orders for when hearings will be held to schedule the Master Commissioner’s sale. Lawrence & Associates Accident and Injury Lawyers, LLC has one client whose hearing is as early as June 11, 2020. While the amount of time depends on the county you live in, it does seem like homeowners who are several months behind on a mortgage have even less than the seven weeks that renters have to get caught up or find another way to save their homes.

What Does Bankruptcy Do to Save Your Home?

For homeowners, this answer is easy. If you’re behind on your mortgage and you can’t catch up, you file a Chapter 13 bankruptcy. The rules in Chapter 13 are simple. You have to make your regular, monthly mortgage payment directly to the mortgage company beginning when the next payment is due after the bankruptcy is filed. (So for example, if you pay on the first of every month and you file bankruptcy on June 15, you’d need to start regular monthly mortgage payments again on July 1.) The total unpaid arrearage on the mortgage goes into the bankruptcy and your monthly bankruptcy payment will pay it off in full. The mortgage company can’t charge interest on the arrearage in the bankruptcy, but they get to charge any late fees or attorneys fees that were applied before the bankruptcy was filed. Your normal interest rate applies to the rest of the mortgage. You can file this bankruptcy at any time before the Master Commissioner’s sale, but once that sale happens the bankruptcy can’t save the home anymore. But whatever you do, don’t wait until right before the sale happens. You have to come up with several hundred dollars and quite a few documents to file, and the average client takes around a month to get everything together. Even if you are faster than average, you might not find an attorney willing to turn it around for you in just a day or so. That kind of speed can lead to mistakes, and many of us have other clients already scheduled to file.

For renters, the answer is a little more complicated. Your safest bet is to file the bankruptcy before the eviction is ever filed in court. If you do that, you’ll still have to get caught up on your rent while the bankruptcy is in progress, but you are guaranteed the opportunity to do so. The landlord cannot file an eviction while the bankruptcy is proceeding. But if the landlord files the eviction in court first, the landlord has a unique power to negotiate an agreement over the rent arrearage rather than having an agreement forced on the landlord by the bankruptcy court. If you wait to file bankruptcy until after an eviction is already filed in court, the bankruptcy will stop the eviction action temporarily. But it’s not a given that the bankruptcy will automatically save you from eviction. Landlords have a lot more rights in bankruptcies than most other creditors. This means Kentucky renters who are behind on their rent should not wait until July 25, 2020 or the end of Kentucky state of emergency before they file bankruptcy! Beating the landlord to court is the surest way to make sure you aren’t out on the street once the state of emergency expires.

If you have more questions about evictions or foreclosures, or just about how bankruptcy works in general, don’t hesitate to call Lawrence & Associates Accident and Injury Lawyers, LLC at (513) 351-5997. Our attorney consultations are free, confidential, and can be done by phone or video. We’re Working Hard for the Working Class, and the COVID-19 pandemic can’t change that. Good luck out there!