What Happens When One Tenant Files for Bankruptcy?

[Kevin Kim]

Hi,

I’m considering renting to a family that filed for bankruptcy several years ago, but I’m concerned they might file again. If three adults in the household sign the lease and one of them files for bankruptcy, would that allow them to avoid paying rent for three to five months?

Thank you. 

[Ken M.]

Quote from @Kevin Kim:

Hi,

I’m considering renting to a family that filed for bankruptcy several years ago, but I’m concerned they might file again. If three adults in the household sign the lease and one of them files for bankruptcy, would that allow them to avoid paying rent for three to five months?

Thank you. 

.

Bankruptcy is very misunderstood.  There are two kinds of bankruptcy individuals can file.

Chapter 7 is where debts are wiped away.
If someone files chapter 7, they have to wait another 7 years to file again.

Chapter 13 is where debts are re-organized and paid back over time in monthly payments.

If someone has filed either chapter 7 or chapter 13 previously, they are less risk than someone who has never filed. Their debts have either been wiped away or dealt with through a payment plan. They probably actually have less debt than most other people, so it is easier for them to make rent payments.

The vast majority of bankruptcies are medically related.

They have been "through the system" and they don't want to go through that again. It's very intrusive. They will do what they have to, to get their rent paid.

As long as someone has a good, solid, verifiable income, I wouldn't hesitate renting to them. 

Same as if someone who has never filed, as long as they have a good, solid, verifiable income, I wouldn't hesitate renting to them.

I believe it is against the law to discriminate based on a previous bankruptcy filing. 

Now, if they are currently a renter, and they file either chapter 7 or chapter 13, you must hire an attorney to protect your interests in a bankruptcy proceeding. Do not evict, do not try to collect past unpaid debt, do not hassle. The "stay" granted in a bankruptcy is "absolute". You can get into a lot of trouble violating the automatic stay. Hire an attorney for sure. A renter does have to stay current on every payment after they file though, or you can evict with a court order.

There is much more, but for purposes of renting to someone who has filed in the past, not a problem if they have good income.