You've just learned your tenant is filing for bankruptcy.
A million questions pop into your mind. Are they going to stop paying rent? Can I evict them if they don't pay rent? What are my legal rights as a landlord? These are all valid questions. After all, you didn't become a landlord to house someone for free. Your real estate is your investment.
Can my tenants stop paying rent if they file for bankruptcy?
Tenants have a choice when they file for bankruptcy. The first choice is to vacate the rental. By making this choice, the renter can avoid paying any fees for breaking the lease. However, the tenant will need to pay any debts owed, but won't accrue more.
The landlord files a claim with the bankruptcy court of the debts owed. The court will then decide the order to pay debts, and the landlord needs to leave this process up to the court. If the landlord pursues debts owed on their own, they will be hit with a fine.
The second choice a tenant has when filing for bankruptcy is to stay in the unit and pay rent as normal. Tenants who want to remain in the rental must pay rent or risk eviction once the bankruptcy proceedings finalize.
Can I evict my tenant who files for bankruptcy if they don't pay rent?
The answer to this is in timing. If the tenant was already served an eviction notice before they filed for bankruptcy, you can continue on your journey to evict. When a tenant files for bankruptcy, they get an "automatic stay," which stop creditors from going after debts owed. However, if the eviction process had already started and an eviction judgment has been granted, the "automatic stay" can be ignored and the eviction goes on as normal.
If the eviction was due to non-payment, in some states the tenant can stop the eviction by filing a certification with the bankruptcy court saying that the state allows tenants to stay in the rental unit by paying back rent. The tenant then pays the court the rent that is due within 30 days of the petition. Last, the tenant serves the landlord the certification.
If a landlord begins the eviction process after bankruptcy has begun, any attempts to seek debts after the "automatic stay" has been granted can result in fines for the landlord. To evict a tenant who has already begun the bankruptcy process, the landlord must go to the federal bankruptcy judge and request the "automatic stay" to be lifted.
Legal landlord options
Landlords have options when a tenant files for bankruptcy.
- Wait out the bankruptcy proceedings and evict once they're complete. Keep in touch with the bankruptcy court. This will keep you on top of where your tenant is in the bankruptcy process.
- Request a lift of the "automatic stay" to continue an already started eviction. Go to the bankruptcy court and submit your request as soon as you learn about the bankruptcy.
- Keep your tenant. They might be great and just going through a rough patch. They will continue living in the unit and pay rent. Often, when other debts are discharged in bankruptcy, renters can afford to pay rent.
Find your local bankruptcy court here.
Protect Your Rental: Screen Tenants with Apartments.com
When a tenant files for bankruptcy, they do not get a free home. As a landlord, you have options to get your rent paid. Make sure you understand your rights as a landlord and communicate with the bankruptcy court. With open and continued communication with the bankruptcy court, you will be able to legally ensure debts owed to you are paid.
Additionally, screening prospective tenants on the front end can help you select the most qualified and suitable renters for your property. Apartments.com makes it easy to screen tenants, get the information you need, and find a qualified renter fast. Unlike our competitors, who use various third-party resources to collect information, we partner with TransUnion to provide you with screening reports for evictions, credit, and criminal history. Another feature you’ll find only on Apartments.com is support for co-signers, guarantors, and co-applicants. If you need more information to make a decision, you can request supporting documents from potential tenants directly on our platform. Get all the information you need to find the right tenant quickly and easily.
