Should you rent to a tenant who filed Chapter 13 Bankruptcy one year ago?

[Jennifer H.]

What are your thoughts to renting to a tenant who went under Chapter 13 bankruptcy? Tenant that applied has a very low credit score of 545 and is under Chapter 13 bankruptcy. Credit check reported bankruptcy on 03/07/2013. It is now 12/16 and not sure of the risks to renting to someone like him.

Here are the other details:
- Told me up front that he had low credit due to his marital issues and he filed bankruptcy but is working that out. Is in middle of getting divorced from her now.
- He makes 100,000/year and I was able to see that in his paycheck stub. (rent is 1275)
- Has had same job for 6 years and I saw on paycheck stub a bankrupcy amount of around 300 being auto deducted each paycheck.
- 3 other mortgages showed up on his credit check and he said those are being rented out.
- He has 2 daughters that would live with him who in college in town.
- He says he is looking for inexpensive place to live and help pay for kids college and is able to provide me with 2months security deposit.
- Left bank account / checking information blank though on our application so dunno how much money he has in the bank.

We like him but are just scared to rent to him due to his bankruptcy and low credit score. Thoughts?

[Dion DePaoli]

@Aaron Mazzrillo I don't think that is correct. Did that happen to you?

When the BK is filed, the list of creditors is established. It is not an open enrollment list. So once the list is made and the BK plan approved, that is it, it is done. A new landlord would not be added to it. That would sort of create BK in perpetuity. The BK plan does not include "future debts" only past.

A lease or rental agreement already in place at the time of BK can be included and the landlord is an unsecured creditor however the tenant who filed BK has to affirm the housing or surrender the housing back to the landlord. If they affirm, the back rent may be discharged. During the initial BK process any eviction would stay by BK order. The landlord would need to file proof of claim and affirm or surrender would apply.

If the tenant agrees to affirm the debt, they have to start paying again. Failure to pay would be a breach and the landlord would be within their rights to move forward with eviction. I am guess, although not sure, the landlord likely has to file for relief first.

If the BK plan is discharged or dismissed, then there is no protection under BK so I don't understand how it would affect anyone including a landlord up to six months after the event.

The terminology might be different than what I used for landlord tenant. I think it might be assume or reject opposed to surrender and affirm.