Tenant declaring bankruptcy, how to protect myself?

2 Replies

Single family home, USA

Tenant has not missed a payment (though they have only been on the lease for 6 months). I just got a letter in the mail from a law office saying that my tenant is declaring bankruptcy. I only know a little about bankruptcy law so I want to understand where I am protected/exposed:

  • Is their lease null and void now?
  • Is the tenant required to continue paying rent?
  • Should I start preparing for eviction?

These renters have not missed a payment, so I would rather not evict.  What I'm worried about (and this is where my legal knowledge breaks down) is that by having tenants that declared bankruptcy:

  • they are no longer required to pay under their lease,
  • I have no legal recourse if they decide to stop paying, or
  • my landlord rights are reduced and it will become much harder to evict or force payment if they stay

Well if they stopped paying and you evict, chances are low that you’d get anything out of them regardless, bankruptcy or not. 

If anything, you’re probably more likely to keep getting rent from them after bankruptcy.

1) They now will likely have no other debt which means more money in their pockets to pay the rent...

2) They aren't going to be getting a mortgage anytime soon, so they're going to be renting for awhile.

I googled this and found:

If a tenant fails to pay rent or violates a term in the rental agreement, an automatic stay will prevent the landlord from giving the tenant a termination notice or from beginning the eviction process if the tenant has already filed for bankruptcy. The landlord can proceed with the eviction by asking the federal bankruptcy court to lift the stay. In most cases, the judge will lift the stay because a lease agreement has no effect on the value of the tenant's estate.