Tenants that have filed for Bankruptcy?? Do you rent to them?

Question

Hi BP,

Quick question:

Would you rent to a tenant that meets all other criteria for your rental but has filed bankruptcy in the last 5 years??

Thanks.

Nathan Gesner · Answer

I would accept their application and screen them. If they have good history for the last 3+ years, I would probably accept them. If they were a real mess, it would show up in the past three years.

Aaron Hunt · Answer

That might be even worse.

If their health bankrupted them once already, I'm not sure I would be able to to evict someone who can't pay me due to potentially deteriorating health. I'm not screening for health related issues as a criteria - if I just see a bankruptcy, I'm moving on.

Bryan Devitt · Answer

Last 3 years, no. After that, yes. If they haven't learned their lesson then they'll be back in trouble within the first few years. There are a bunch of reasons people declare bankruptcy and I'm not going to ask them for the discharge papers to see who the debtors were and figure out how they got there.

Jack B. · Answer

I rented to a guy who was a home builder and owned a multi million dollar house Zuckerberg style. He filed for BK during the recession. I rent to them with a higher rent and higher deposit. The BK was maybe 4 years behind them when I rented to them. There have been minor issues with utilities, and them just being a little "different" but as long as you stay on top of them they are good tenants overall. The nice thing is they have nowhere else to go as it's difficult for them to find a rental, especially with multiple cats and dogs. They have an incentive to cooperate.

Anthony Wick · Answer

I would say, if you have any other decent applicants at all, go with somebody else. But, if you want to entertain the idea, I would ask for a copy of their bankruptcy documents. I would not take their word for whatever the reason was. But then again, I just said I wouldn't rent to them, so....

Johnny Rhee · Answer

I wouldn't rule out someone with a BK. The point is to keep a good tenant for as long as possible to minimize turnover. I've purposely steered away from tenants with awesome credit and tons of money sitting in the bank. I just know they aren't going to stay for long and will probably buy their own place within 1-3 years.

Why did they have a bankruptcy? Sometimes there's a good reason for it like medical issues. I've rented to family with a BK after a serious illness of a family member. They had good stable incomes with long track record of being employed in the same place. Also after reviewing 2 months of bank statements, I felt they were financially responsible. I knew they couldn't buy a new house for years due to their credit being ruined. I ended up renting to them and working out a higher deposit and slightly higher rent to compensate for the risk. They were super appreciative and were so happy to be "chosen." After renting for 6 years, they finally ended up offering to buy the house once they their credit was good and they had saved a down payment. Ended up gladly selling the place to them for minimal selling costs and purchasing a new property.

When it comes to renters I prioritize three things: 1) What's the likelihood of a long term renter of more than 5 years? 2) How stable is their profession and how stable is their job at their current company? 3) Will they be good stewards and maintain the house? Are they handy enough to fix small things?

If you like them, I would ask all the tough questions and be open to working something out.

Travis Salley · Answer

Cassidy,

The tenants in my property have filed bankruptcy and so far they have been great. When I screened them, I asked the circumstances of the bankruptcy and their current financial situation. Turns out the bankruptcy was due to overwhelming medical debt. Since the tenants had a great income I decided to take a chance on them. They have lived in the property for about a year and I have had no issues.

Aaron Hunt · Answer

No. I don't believe in second chances.

Yeah, I said it. Come at me.

Tenants that have filed for Bankruptcy?? Do you rent to them?

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