Question: I am accepting applications for a rental property that is vacant. I received an application from a qualified applicant, but they are currently in bankruptcy. They said that they can make the monthly payments. Should I rent to them?
Answer: I can’t tell you whether or not you should rent to a specific person, but I can warn you of the potential problems that bankruptcy can present for a landlord. Specifically, if a tenant is in bankruptcy, by law they receive the protections of 11 U.S.C. § 362, which creates an automatic stay prohibiting any actions against the tenant. This means that if the tenant is in bankruptcy, and fails to pay rent or otherwise breaches his lease, the landlord can not immediately serve a notice and file an eviction. The landlord must enter into the bankruptcy proceedings and seek a “lift stay order” which permits the landlord to pursue the eviction. Unless the landlord gets permission from the court, the landlord will be liable to the tenant for filing an eviction in violation of the automatic stay. It can often cost several thousand dollars and several weeks or months to obtain a lift stay order. Of course, if the tenant always pays rent and is complaint with the lease, this may never be an issue, but if they breach the lease, the bankruptcy will create problems for the landlord.
Information contained in this post is for informational purposes only and should not be considered legal advice. You should always contact an attorney for legal advice and not rely on information published here.