Tenant has a Chapter 7 Bankruptcy on Credit Report

Tenant Screening
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Tenant has a Chapter 7 Bankruptcy on Credit Report

Frank Agyeman-Duah
Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes

I'm currently screening prospective tenants for my property. One application has a 613 credit score , receives $3700 as a disability income from the Department of Veterans Affairs as an ex Navy.  I asked him about the bankruptcy and he said it was from her ex wife who had incurred a lot of charges in his name and he had to file to discharge all those.  I need your comments and suggestions. Thank you.

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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
4y

I also should mention that an ex-military on disability should be given special consideration. Many of our veterans sacrificed their health, their marriage and their mental well being to serve our country. Show proper respect and help if you can. 

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    4y

    How long ago was the bankruptcy?  Otherwise, was his payment history strong?  Those are the sort of things you need to ask yourself.

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  • Frank Agyeman-Duah
    OP
    Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes
    4y

    @Greg Scott

    The brankruptcy was filed in 2020. He has a 99% payment history. He has lived in his current address for 8 years. I’ve left a message for the property manager to get back to me.

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  • Casey Hoerth
    Investor · Tyler, TX · Member since 2021 · 17 posts · 22 votes
    4y

    Hi Frank,

    As a truck driver, I can say I've run into guys I've driven with in similar situations as your tenant has. It can be rough. Sounds like it was a messy divorce, and as you probably know, such things tend to be destructive to the credit score. His income sounds stable. 

    I once had a co-driver whose credit score got knocked down to the low 500s after his ex maxed out the credit cards and dumped it on him after filing for divorce. Previous to that his credit score was in the 700s! He is still trying to climb out of that hole. If I owned a property and was renting to someone like my co-driver, I would absolutely take him in. 

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  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    4y

    @Frank Agyeman-Duah,

    You know what's interesting about a bankruptcy, is that guess what-- no one will give you any credit/debt!   If all his debts are wiped out, he won't likely have a lot of other bills.   They also know they can't do it again for 7 years, so I know this might be a VERY unpopular opinion, but I don't see it as a bad thing.   Look at it logically, in his upcoming months-- what other hands are trying to pull money from his pockets?  not many!   Also, people who have filed know they are getting shut down right/left, so they often are really good tenants!  

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  • Frank Agyeman-Duah
    OP
    Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes
    4y

    @Linda S.

    Thanks for your input.

    1Reply
  • Frank Agyeman-Duah
    OP
    Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes
    4y

    @Casey Hoerth

    This is very helpful. Thanks

    1Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 728 posts · 596 votes
    4y

    @Frank Agyeman-Duah

    Depends on previous rental history. If he has paid rent on time consistently, I would consider leasing. I would however require a larger deposit. My normal is 1 month, but for issues like this I will require 2 months security.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    Just be cautious when you are being given a story. Sometimes the story is half truth or even complete lies. People will say divorce or medical debt when they have bad credit, because these two things are seen as out of their control. This is where you need to read beyond the credit score. Look at payment history since the bankruptcy and make sure there are no missed payments. You can even ask to see bank statements for the last 2-6 months to see what balance they carry. 

    An 8 year landlord reference can be good or bad. Make sure whoever you talk to for that reference is reliable. Hopefully it is a large apartment complex, so you are dealing with professional property management. You want to call and office where you can verify the number is real. Unfortunately people will give out their friends phone number or the current landlord will lie to get a bad tenant out. 

    The other interesting detail is that he has lived at this address for 8 years. So assuming he was divorced right before his bankruptcy, that means he would have lived there with his wife. It is possible that she moved out, but it also could indicated missing address history. Look at the credit report and see what addresses are on there. I have found apartment addresses on credit reports and contacted them for reference. It can be very enlightening. Also get a photo of his drivers license and make sure the address matches his current address. People try to hide previous addresses, so make sure he is not lying to you. If you get proof that he lied on his address history, it needs to be automatic denial.  

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    Ask to see his divorce judgment to prove he was stuck with all the marital debt. Of course, this still doesn't prove the ex ran up the bills.

    Also, understand that his disability income is NOT garnishable. So, if he doesn't pay the rent, you can evict him and get a judgment, but you won't be able to garnish his income.

    We would put most of our approval decision on the past rental history. Hopefully it is with a property management company that can give you a Rent Ledger for even further validation.

    [email protected]248-209-6824
    Logical Property Management4.9458 Reviews
    WebsiteView Page
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  • Frank Agyeman-Duah
    OP
    Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes
    4y

    @Curtis Mears Thanks

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  • Frank Agyeman-Duah
    OP
    Real Estate Agent · Dallas, TX · Member since 2020 · 145 posts · 42 votes
    4y

    @Joe Splitrock

    Well noted.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y

    I also should mention that an ex-military on disability should be given special consideration. Many of our veterans sacrificed their health, their marriage and their mental well being to serve our country. Show proper respect and help if you can. 

    2Reply
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