Renting to someone with Chapter 13 BK

7 Replies


I know there are several different feelings on this, but I wanted to get some input. If a potential tenant has filed Chapter 13 due to needing to withdraw money from their 401k accounts to pay for the funeral expenses for several family along with medical expenses, and owing back taxes because of the 401k withdrawals, would you rent to them? Assuming they have long term jobs and have enough to pay for rent and utilities  on top of what they owe, and no criminal record, U/D, or evictions.

Or would you need to know like how much longer they have in their plan/how much they owe? 

Would you require a co-signer and/or increased rent or just say "nope!" and move on?

Just looking to hear what others think on situations like this.

Only if they were the last tenant on Earth, and maybe not even then. 

One of my tenants did this while in my unit. I might someday see the 4K she owes.

I wouldn't assume anything. I would politely say NO and then find someone else with a good financial position ASAP. If you're in the market price wise you should be fine. Good luck

Well, I wouldn't not (I know....double negative but) rent to someone because of a Chap 13. But I would want to know more about the details. If what they say pans out, then it might well have been a lack of knowledge about the tax penalties on a withdrawal. That does not automatically make them a bad risk.

Some areas the tenant pool is not as great, so you have to choose from the least of the worst.  it looks like you can file for Chapter 13 every two years.  Has anyone else out there rented to a Chapter 13 potential tenant?

That is way too risky to even consider in my opinion.

I never waste my time researching the reasons why a applicant does not qualify, in an attempt to qualify them, I simply move on to though next applicant.

Landlords that are desperate will often try to make a unqualified applicant acceptable by convincing themselves that they are low risk due to special circumstances. I don't care how they got into trouble I just assume if it happened once it can happen again.

Look at their credit before and after the family deaths, 401k withdrawals, tax problems and ch13.  If they were in good shape before and are back in good shape now, that could indicate bad luck clobbered them and they might otherwise be responsible.  Talk with them and listen to their story.

I have tenants now with this situation.  Woman had a messy divorce, medical issues and credit was clobbered as a result.  Man had medical issues that disabled him, took his income and it resulted in a bankruptcy.  They met and got engaged.  Talk about a double negative!  Their financial life appeared stable for about 18 months when I met them.  I talked with them about each of their stories.  Medical problems and a prior ex running off with all the family wealth were the root causes of their problems.  I concluded, "Not their fault.", accepted them with my other criteria and they've been great tenants for over a year now.

I wasn't desperate - just doing proper screening and keeping in mind that anyone can have a rough stretch in life, then recover.

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