If you would have ran a screen you would known he went bankrupt last month.

In my experience the absolute BEST candidates for cash-outs are recent bankrupts due to divorce or a failed business or some other big one-time loss, and preferably someone who has owned a house before.

This is one of the pieces of advice almost every successful investor that I have met gives me because they have seen the cycles and people go bankrupt taking on too much leverage.

This is not legal advice.If you hold in an LLC with a personal guarantee then yes you would file bankruptcy chapter 7 in a personal name.The reason is if the corp is bankrupt they will then just come after you personally.After the bankruptcy laws changed in 2008 there is a bunch of red tape now and you generally have to pass the means test.In a chapter 7 you would either affirm or not affirm the debt.if you do not affirm the debt is wiped out.The lender can still take payments from you if you want to pay but are not required to after the chapter 7.The lender can just decide to foreclose and not work with you.You could see if you could short sale the properties.You would put a condition in the listing agreement that you do not agree to sell unless you get a waiver of deficiency letter from the bank prior to closing.Do not believe anything the bank says unless it is in writing.Also know that attorneys get paid to file BK so filing BK is not always the answer.Is your credit otherwise good or do you have a bunch of late payments already??

I hate using cash on cash return as a measure of performance because it doesn't factor in the risk of the property (eg you can leverage at 100% and get a phenomenal return but you can easily go bankrupt) but when the cash on cash return is over 20%, it's a pretty tempting buy.

In the mean time, though, I have to survive all kinds of potential hazards that could destroy equity, cause major headaches, or even (gulp) bankrupt me.  

You don't want a bedbug infestation that takes 3 or 4 months to cure, or a broken water or sewer main to cause you to go bankrupt. 

Last thing you want is to inherit a property where the tenant can call adverse possession on you- it will bankrupt you and the property!

A company can go bankrupt, and many things influence the price of oil and gold and silver, people can default on loans, but I can always drive to one of my properties and walk around. 

The contract is assigned and the ability of the new holder of the contract finds they can't execute and convey title.  4, investors need to always consider how their contracts will or could be effected by "life events", people die, become incapacitated, divorce, go bankrupt, they may be sued, medical liens by government can come into play and people are incarcerated.5. murphy's law applies.All these issues can generally be cured in time.