Court Lifts Subtenant's Bankruptcy Stay So Landlord Can Proceed with Eviction Case

The subtenant of an apartment located in landlord's building filed a Chapter 7 bankruptcy petition, which automatically imposed a stay on all creditors including landlord. Landlord asked the court to lift the automatic stay in connection with the apartment and permit landlord to go forward with a housing court eviction proceeding against the subtenant. The tenants had moved out of the apartment but, unknown to landlord, had left the subtenant behind. Landlord maintained that the subtenant was a mere licensee whose license had expired.

The court ruled for landlord. Bankruptcy Code Section 262(d)(2) permits the lifting of a bankruptcy stay if the debtor lacks equity in the property and the property is unnecessary for reorganization. This Chapter 7 case isn't one in which the debtor would reorganize. And the Chapter 7 trustee's report of no distribution from the bankruptcy estate foreclosed any form of a successful reorganization were one to occur. Moreover, the subtenant-debtor had no privity of contract with landlord or any interest in the apartment. His license in the apartment terminated when tenants moved out in January 2021. 

In re Robles: Case No. 22-10828, 2022 WL 3384638 (SDNY Bktcy Ct.; 8/16/22; Glenn, J)