Tenant Filed Bankruptcy

11 Replies

Hello BP family,

We filed for eviction court (tenants past due in rent) and the hearing was supposed to be today. However, I received mail two hours before court regarding a notice to reset/possible dismissal with a new court date in May, 2020 due to the tenants filing a chapter 7 Bankruptcy.

The attorneys we are consulting with want to charge 3k plus (at a minimum). This is our first and only rental property and these are our first tenants.

Has anybody ever went through this or can advise any next steps? We went to the courthouse downtown and were told we can file a Motion For Relief of Stay for $181.00, is this the best and only option? Cash for keys? Anything? 

Thanks so much,

Craishia

This doesn't happen a lot but the law has caught up to "Bankruptcy Abuse" and when a landlord has an eviction judgement in hand, it remains in effect now.  But when you don't have the judgement yet, here's what needs to happen:

"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."  (https://realestate.findlaw.com/landlord-tenant-law/how-a-tenant-bankruptcy-affects-a-landlord-s-right-to-evict.html).

If the tenant has damaged the property or done illegal drugs there, additional remedies are available.  I would pay the $181 and proceed through the bankruptcy court.  The tenant has no intent of leaving or paying you back rent - that's while they filed.  

Go for the Stay and get rid of this tenant!  

Originally posted by @Patricia Steiner :

This doesn't happen a lot but the law has caught up to "Bankruptcy Abuse" and when a landlord has an eviction judgement in hand, it remains in effect now.  But when you don't have the judgement yet, here's what needs to happen:

"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."  (https://realestate.findlaw.com/landlord-tenant-law/how-a-tenant-bankruptcy-affects-a-landlord-s-right-to-evict.html).

If the tenant has damaged the property or done illegal drugs there, additional remedies are available.  I would pay the $181 and proceed through the bankruptcy court.  The tenant has no intent of leaving or paying you back rent - that's while they filed.  

Go for the Stay and get rid of this tenant!  

One of my tenants did this.. and the bankruptcy trustee made us give back 3 or 4 months of rent payments  talk about insult to injury.. ugh.

My client went through the same process and was granted the stay - so the tenant had to move out - but was granted the return of the security deposit; the landlord lost the right to collect any back rent but overall was happy to be done with the tenant.  Justice isn't always...

Wow.  I have no advice, but I hope it gets sorted quickly.  As Patricia said, them renting has little to do with their estate other than they are paying money to cover the rent.  How on earth could anyone expect you to let them live for free in your house until May???

Watch out for any of the bills that the tenants are supposed to be paying that are linked to the house.

Originally posted by @Jay Hinrichs :
Originally posted by @Patricia Steiner:

This doesn't happen a lot but the law has caught up to "Bankruptcy Abuse" and when a landlord has an eviction judgement in hand, it remains in effect now.  But when you don't have the judgement yet, here's what needs to happen:

"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."  (https://realestate.findlaw.com/landlord-tenant-law/how-a-tenant-bankruptcy-affects-a-landlord-s-right-to-evict.html).

If the tenant has damaged the property or done illegal drugs there, additional remedies are available.  I would pay the $181 and proceed through the bankruptcy court.  The tenant has no intent of leaving or paying you back rent - that's while they filed.  

Go for the Stay and get rid of this tenant!  

One of my tenants did this.. and the bankruptcy trustee made us give back 3 or 4 months of rent payments  talk about insult to injury.. ugh.

@Jay Hinrichs did the trustee give you a reason for the required repayment?

Thanks for this, Patricia! The attorney I did speak with advised that it may not be sufficient just to have “back payment rent” as a reason to evict these tenants. I’ve thought about hiring an attorney for a lower cost but I do not see the difference at this time if all I have to do is file a motion..thoughts? 

Originally posted by @Patricia Steiner :

This doesn't happen a lot but the law has caught up to "Bankruptcy Abuse" and when a landlord has an eviction judgement in hand, it remains in effect now.  But when you don't have the judgement yet, here's what needs to happen:

"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."  (https://realestate.findlaw.com/landlord-tenant-law/how-a-tenant-bankruptcy-affects-a-landlord-s-right-to-evict.html).

If the tenant has damaged the property or done illegal drugs there, additional remedies are available.  I would pay the $181 and proceed through the bankruptcy court.  The tenant has no intent of leaving or paying you back rent - that's while they filed.  

Go for the Stay and get rid of this tenant!  

@Craishia Millines

Geez, don't hire that guy, right?!!!  Take a look at this:

"If the tenant stays in possession of the leased premises after filing for bankruptcy, they are required to pay post-petition rent to the landlord, keeping those rent payments current as long as they stay in the unit. Some courts prorate the monthly rent. For instance, a tenant who files for bankruptcy mid-month will only be obligated to pay rent for the rest of that month (not the full month, if rent was due earlier in the month). Other courts hold that rent due on the first day of the month is for the entire month. If the tenant files for bankruptcy on the 15th day of the month, the rent for the entire month, including the remainder of the month after the tenant files, is considered pre-petition rent. Almost all bankruptcy courts consider pre-petition rent to be unsecured debt, which is paid with other unsecured claims—but only after secured and priority claims are repaid. So the good news for landlords is that tenants who file for bankruptcy don’t get to just stop paying their rent; but any rent that was past due will take some time to collect." (https://www.buildium.com/blog/tenant-bankruptcy/)

So-o-o, I would schedule an inspection of the property - giving the proper notice - and see its condition.  If it has been damaged in anyway - or if it appears they have been using it inappropriately (like sub-leasing, a business, etc) you can include that in your request with the court as another reason for termination.

The good news here is that once a bankruptcy court orders them to pay - failure to do so will discharge their bankruptcy filing and you'll be back at eviction with full right to go after back rent due. Not paying, therefore, is not an option.

There's so much on this topic online that I don't recommend investing money being told what's online.  Do the inspection, file the stay, and get paid one way or the other. I hate that you're going through this.  It's a slow process too so get your filing in early to beat the herd of creditors.  Fingers crossed that it goes quickly.

Originally posted by @Jay Hinrichs :

One of my tenants did this.. and the bankruptcy trustee made us give back 3 or 4 months of rent payments  talk about insult to injury.. ugh.

How exactly did they make you give it back? Did they get a court order or was it just threats?

I had a bankruptcy trustee contact me demanding I repay several thousand dollars because the person purchasing items from me used a business credit card and according to the trustee, they had not received fair value for the purchases. I showed it to my attorney and he started laughing while reading the letter and didn't even finish reading it. His advice was very simple:

  1. Throw the letter in the trash.
  2. If another letter arrives, contact the trustee and tell him to "Go F himself"
  3. If another letter arrives, let him know and he will write a letter to the trustee telling him to "Go F himself". 

#2 was the last contact I ever had with the trustee. My attorney said that the trustees generally send out demand letters to anyone and everyone with the hope they some will pay out of fear or ignorance and others will call up and agree to a smaller amount. 

Originally posted by @Greg M. :
Originally posted by @Jay Hinrichs:

One of my tenants did this.. and the bankruptcy trustee made us give back 3 or 4 months of rent payments  talk about insult to injury.. ugh.

How exactly did they make you give it back? Did they get a court order or was it just threats?

I had a bankruptcy trustee contact me demanding I repay several thousand dollars because the person purchasing items from me used a business credit card and according to the trustee, they had not received fair value for the purchases. I showed it to my attorney and he started laughing while reading the letter and didn't even finish reading it. His advice was very simple:

  1. Throw the letter in the trash.
  2. If another letter arrives, contact the trustee and tell him to "Go F himself"
  3. If another letter arrives, let him know and he will write a letter to the trustee telling him to "Go F himself". 

#2 was the last contact I ever had with the trustee. My attorney said that the trustees generally send out demand letters to anyone and everyone with the hope they some will pay out of fear or ignorance and others will call up and agree to a smaller amount. 

My bad I answered before I had my second cup of coffee.. its was a tenant that I booted out got a garnishment garnished here wages for about 9 months  then she went chapter 7 and trustee made me give back I think 3 or 4 payments or it was a dollar amount like 3 to 4k I remember it being significant enough when I had to write the check.   was not as I stated rent.. it was Garnished wages I had to give back I garnished the wages for non payment of rent.  sorry for the bad answer on my part..  I was wrong !!!