Would you rent to tenant in Chapter 13 if they pay for full year

[Mike Oconnell]

Would you rent to a prospective tenant who is in Chapter 13 bankruptcy if they pay for full year up front?

Thanks!

[Michaela G.]

Check your local landlord-tenant laws. In some states there's a limit on how much advance payment you're legally allowed to accept. 

For example, in California, you're allowed a maximum of 2 months, in addition to 1st months rent. Regardless of what it's called: security deposit, last month rent etc

[Merry Briotta]

I would, absolutely. Of course, that assumes everything else that you screen for checks outs (background checks, reference checks, prior landlords, employment, income qualifications, etc etc etc.

As a landlord my two biggest (not the only) concerns are whether or not they can handle the unit financially and whether or not I feel they will take good care of the unit.

Good luck!

[Robert M.]

Nope, just had a tenant go from 13 to 7.

have also seen courts "claw back" advance payments.

[Jeff B.]

Originally posted by @Michaela G.:

Check your local landlord-tenant laws. In some states there's a limit on how much advance payment you're legally allowed to accept. 

For example, in California, you're allowed a maximum of 2 months, in addition to 1st months rent. Regardless of what it's called: security deposit, last month rent etc

 True, but a tenant may make those payments and then prepay the remainder of the year.

I would not accept anyone making that offer, as they already know what you would soon be learning - - they will soon be without income and roost without further payments in the future - - (personal experience).

[Jim Shepard]

Think about it...they can't pay their bills and file bankruptcy. But they have a years worth of payments to pay you. Do you think you will get paid next year? I'd pass.

[John Thedford]

Check state laws. In FL, advance rents must be held in a separate account. This is a liability. If they default, you may be forced to return them. As a general rule, I would say no thanks. 

[Mike Oconnell]

Thank you all for your very helpful advise!

[Michaela G.]

Originally posted by @Jeff B.:

 True, but a tenant may make those payments and then prepay the remainder of the year.

 As I understand it, tenants are ONLY allowed to prepay those 2 months and not anything else. So, the landlord can't accept more than 2 months advance payments, including security, last month or 3rd months payment or whatever it's called.

[Brad Boone]

yes, if no evictions

[Dick Rosen]

Absolutely not!

[Richard Recuset]

It depends! Check your local laws. If it's a go, I would have them attain a police report. Have the tenant go to the police dept. to obtain the report to show as proof. Ask for 2-3 months pay stubs. Have them fill out a tenant rental form. Of course, you can hire a company to do all this. It's great to collect one full year in advance. You know they won't be late. You can always add in the lease, if renewing, a minimum of 6m dep. is required. Give them the benefit.
It's a judgement call! Personal meeting and due dil. goes a long way. Facts are better then a gut feeling when it comes to tenant selection. All the best!

[Douglas Snook]

I can't see how they can even make that offer if they are a bankruptcy. A 13 is very structured and any additional money is usually taken by the court to pay other creditors. If they are sitting on $12,0000 (assume rent is $1000) that money belongs to the estate and the trustee can take it.

To do something like this in a bankruptcy there has to be a reason AND Court approval to enter into a new lease if they are not already your tenants.

Something doesn't sound right here. I think you need to look into this further. Maybe call their bankruptcy attorney if they have one. You do not want to run afoul of the bankruptcy court.

[Jeff B.]

Originally posted by @Michaela G.:

Originally posted by @Jeff B.:

 True, but a tenant may make those payments and then prepay the remainder of the year.

 As I understand it, tenants are ONLY allowed to prepay those 2 months and not anything else. So, the landlord can't accept more than 2 months advance payments, including security, last month or 3rd months payment or whatever it's called.

 I obviously differ in opinion.  Key difference is Seeking Payment > 1st + Security vs Accepting Rents in Advance, after the 1st+security has been made.

[Therese V.]

Definitely no. Where did they get that extra money if they are in bankruptcy? Something fishy is going on and I wouldn't even want to try to guess what. Just say NO! 

Wait around for a better applicant.

[Account Closed]

I had an applicant like this but upon further discovery I learned that they hadn't really paid rent in the last 18 months or so. They had not fulfilled their lease agreements with their previous two landlords and filed wage earner against those rents. They had only pre-paid about 6 months of rent on the first property and skipped out on the remaining months. Needless to say, I declined the application.

[Alicia Villines]

Hell YES!  As an attorney who's just moving out of bankruptcy practice, Chapter 13 offers the opportunity to have the rent paid to you by the trustee.  Advance payments?  Not really.  Not sure how a Chapter 13 debtor would have the cash to pay in advance.  

The idea behind Chapter 13 is simple:  Debtor's income minus reasonable allowed expenses equals payment amount available pro-rata to creditors.  Assuming the rent is not overly high, it's an allowed expense.  

[Phil Earley]

Anyone in an active bankruptcy should be an automatic denial.   You should have time limits in place in your screening process from when the bankruptcy was discharged for approval or denial.   The time limits are designed to help insure they have cleaned up their act since the discharge.  

@Robert M. nailed it!

Applicants with a discharged bankruptcy can be great tenants for years to come until they can obtain financing again to purchase.   

[Sarnen Steinbarth]

To me this would be a flag, but not an automatic yes or no.

I'd look at other factors to come to a final decision.

[Victoria L Bates]

I know this thread is 4 years old but I would like to share my perspective as my husband is on the flip side.  I am very disheartened to find so much prejudice against people who have filed for bankruptcy.  Not all cases of bankruptcy are due to irresponsibility with finances.  In my husband's case, he was forced to file for bankruptcy because his ex-wife, who was awarded the marital home in their divorce failed to fulfill a court order to have the property refinanced in her name only, as she was a cosigner on the original mortgage.  Upon meeting a new beau who got a job promotion in another state, she abandoned the property, leaving the mortgage debt to my husband, whose name was still on a mortgage to a house that he had no legal rights to.  So, he was left with no option but to file for bankruptcy.  We are, and always have been, very responsible with our finances.  We pay our bills on time, have perfect rent history, and perfect repayment history repaying his chapter 13 bankruptcy.  We are just awaiting his discharge papers from the courts.  Meanwhile, we are being forced out of our current apartment because of black mold, yet cannot find anyone to rent to us.  Our current landlord has no available units and says he cannot afford to put us up in a hotel while the apartment is being renovated.  We cannot find a rental agency who will give us so much as a glance because of "policy".  Everyone is entitled to their opinions and personal decisions, but make them based on individual circumstances, not just judging everyone by the same standard despite differing situations.