Having a subscription to a public records background check is very handy and for a minimal fee you can run background checks on the Sponsor including but not limited to civil lawsuits, criminal records, liens, judgments, bankruptcies, etc...

. - No open Bankruptcies - must be discharged 3 months prior to application- Criminal Record - no sex offenses, domestic violence, property damage, violent or fraud offenses - I don't include anything regarding current bills, credit score, etc. 

If an individual that signed a note has no assets, or sells everything, or files bankruptcy... likelihood you ever see anything is slim.  

One medical bankruptcy but I always overlook that.

Also, I don't know how the city will resolve the bankruptcy issue (Fed/State Bail out?

If your lucky this landlord of yours that didn't want to cooperate will realize he has a debt that he is liable for and no property as an asset & file for Bankruptcy.

And if you don't include the risk of somebody messing up something that will unleash the wrath of the IRS on me.Then there is asset protection: can you lose the beneficiary interest in a CRT in bankruptcy ?

The previous owners filed bankruptcy and moved out approx 10 years ago.

I failed to mention he is in bankruptcy.

There was a case here that the owner appealed in court, file bankruptcy, and did everything possible to delay the proceedings.