As Jay mentioned many people probably would have had to file bankruptcy in this situation.

Supposed I only have a net worth of $250K, then I get a judgement against me for the remainder of $1,750,000, right and I have to either pay that off over the rest of my life or file bankruptcy?

That's what keeps you in your real estate instead of driving you into a bankruptcy court.Vacancy is very difficult to predict because there are so many variables.

Did one of the tenants file bankruptcy?  

For instance I would state that a bankruptcy may not disqualify you, but a credit and background checks and a min score of 620 is required.and/orA income verification will be done and minimum income requirement of 3x times rent is required.and/orThis is a smoke free property.and/orWe allow 2 pet on a case by case.and/orFor additional consideration please free feel to tell us about yourself or anyone else in your family that will be staying on the property.Sometime the approach is as important as the question.  

Turns out they hired me to fix it up so they could try and sell before foreclosure, and then they filed bankruptcy.

Bankruptcy, tax foreclosure, evictions, code violators....

The bankruptcy appears to me as a major red flag. 

No seizure of personal assets, no wage garnishments and no personal bankruptcy from a lawsuit arising at one of your properties as long as the LLC is properly formed and maintained. 

The last thing you want to have in life is to end up in a bankruptcy case - I'd rather commit suicide than ending up in bankruptcy.