Evicting a tenant who filed for bankruptcy: cash for keys?

[Andy H.]

Has anyone ever offered a tenant who is behind in rent and has filed for bankruptcy cash-for-keys to get them out?

We have a property in Memphis that is being managed by a property manager. The tenant paid May rent, but then we were notified a few days later that the payment was returned for insufficient funds. The PM notified the tenant that if they did not pay within 3 days, they would start eviction proceedings. Tenant didn't pay; we told PM to go ahead with filing for an eviction. 

Found out from PM today that the tenant has filed for bankruptcy, and, hence, we will need to file a Montion to Lift Stay of Bankruptcy with the bankruptcy court to get permission to proceed with the eviction. According to the PM, it can take up to 3 months to actually get this squatter out of our property (although they are hoping it will be sooner than that).

Given that we'd like to get them out of there as soon as possible, we are considering offering them cash-for-keys if they will just vacate the property within a week or so and leave it in decent condition and we won't proceed with an eviction. Has anyone done this? Given that they could vacate at any time if they chose to, I don't see how making them this offer would be illegal, but perhaps I'm wrong on that.

I don't know yet whether they filed chapter 7 or 13, or when the bankruptcy filing happened in relation to them being given an eviction notice (we do not have an eviction judgement though). The PM also wasn't clear yet whether May rent was included in their bankruptcy filing.

Any input is appreciated.

[Paul Choate]

I am a bankruptcy attorney on the debtor's side generally. I have my own rental units.

It sounds like you have not received the notice. You can go to www.pacer.gov and find out if they have actually filed. There are very specific rules on this matter so I would talk to a bankruptcy attorney instead of a general practice attorney so they can give you the specific advice for your situation. Here are a couple of points to consider:

1. As the attorney, it is my job to deal with creditors for my client. You should try to contact the bankruptcy attorney representing your tenant to offer the cash for keys deal. They may actually come up with all of the money to pay you now that they are not paying their other debts.

2. Never contact a debtor after the filing of a case about debt prior to the filing. Your attorney will be able to file a new eviction for the rent accruing after the filing of the case. Let them (the attorney) work out when that can be done as it is a combination of the federal bankruptcy rules and your local landlord/tenant laws. When in doubt- get a lawyer! Bankruptcy laws are very debtor friendly and your actions can be misinterpreted.

On the criminal charges- As a debtor's attorney, I would happily file a contempt of court citation if someone submitted a bounced check to the DA's office after a bankruptcy case was filed. There are some legal reasons why that may or may not be the case, but you don't want to be the one litigating it. I have had a similar situation happen once before but the criminal case started before we filed the bankruptcy so I did not fight it. Criminal cases are not stayed by the filing of a bankruptcy. Your actions might be. As a landlord this is not great but- remember- if they hang around and rack up a few months of rent, that debt may not be discharged in the bankruptcy and you might be able to collect on them!

If I have not made it clear, this is a situation that requires an attorney to take you through so you can 1. protect yourself and 2. get the property back asap.