Bankruptcy is a borrower's remedy that is available when you cannot meet your financial obligations as they come due (ie you owe more than you can repay on a monthly basis). 

Bank want 2 years tax returns, don't show a lot cause we own a lot of rental property, and my financials, which are fairly strong $2M net worth and 740 credit score, but a big black eye with a bankruptcy back in 2011 due to being over leveraged on rentals and the market crash.

Here's the facts:3/2 1900 sqfthighly sought after area, it would rent right away for $1850Purchased 2 years ago so has very little equityInterest rate is 4.1%He hasn't made payments since AugustFiled for bankruptcy last yearWilling to do a bond for deed and I would assume the loanShould I even take on this property knowing that it has no equity?

I've actually been involved with cases where the punitive damages actually forced the MHC owner/s into bankruptcy and lose their investment altogether because they couldn't pay the punitive award which to my knowledge is not covered by most insurance companies under their personal liability policy. 

He filed for bankruptcy back then around that time and he had to place I believe the immediate family on the title in order to have the loan he has on it now

Tenant just went through bankruptcy; and before that, bank foreclosed on 2nd mortgage on house the tenant owned(May,2016). 

File bankruptcy ?

If I buy the house in California under a LLC, would the house be protected if I personally get sued or if I ever declare bankruptcy? 

From one day to the next, the bank called the notes on that portfolio and he had to file bankruptcy because he couldn't find funds to cover the note.My opinion - If you can invest and have debt investing while being able to cover your notes, then debt is fine as long as you don't let your debt exceed your equity and you have an exit plan.  

This tenant declared bankruptcy which stayed the first writ of possession that I got.