Filing Bankruptcy

[Kent Harris]

A new Tenant had moved in to my rental, once the Lease was signed they had said. "BTW did I mention I'm filing Bankruptcy next month?" Is this going to effect the rent rate there paying now? Are they going to pay rent at all? What should I do in this situation?

[Joel Owens]

Usually if they are carrying a bunch of debt then they will go chapter 7 to wipe it out.

Sometimes it's better to have tenants after a recent chapter 7 because they have a clean slate and it takes awhile for anyone to give them new credit again. That means they cannot load up on high debt fast and generally have the money left over to pay you the rent.

If they are doing a chapter 13 the repayment plans are generally 3 to 5 years. 90 plus percent never finish the plan to a discharge. It gets dismissed at some point for non-payment or non-compliance and then all the late fees and balances tack back on again so they haven't gotten anywhere. Their credit is frozen in the crapper during a chapter 13. The 2008 BK reform laws have made it very tough on BK filers now so it might not be as easy as they think.

BK attorneys generally provide a free consult to advise if it makes a wise decision or not.