Well, it is absolutely true that the tenant announcing the bankruptcy could never be happy news for any landowner. Even though you are accumulating the entire rent, still it means the tenant is having the important financial trouble that could affect the income of the landowner. But, if the tenant is registered for bankruptcy, or you consider that they might be, you will want to realize the procedure, responsibilities as well as your rights as a landowner and hence how the bankruptcy might impact the livelihood.
Now, if you want to discuss what to do when a tenant files bankruptcy, stay tuned to this informative piece to cover every single aspect of the concept.
Hence, this piece would be covering:
- Tenant Bankruptcy: What Landlords Need To Know?
- How To Respond If the Tenant Bankruptcy?
- Tenant Bankruptcy: Can They Stop Paying Rent?
- What to Do If the Tenant Files Chapter 7?
- What to Do If the Tenant Files Chapter 17?
- What To Do To The Subtenant If He Is In Bankruptcy?
Aren’t these some of the major concerns that you have been looking for? If so, then this would be the efficient piece for you to cover all the parameters.
Therefore, without wasting any further moment, let’s knuckle to the following segments one after another.
Table of Contents
Tenant Bankruptcy: What Landlords Need To Know?
Before checking out other parameters it is important for the landowners to pen down which type of bankruptcy the tenant has filed. There are various types of bankruptcy like the following:
- Chapter 7: Liquidation
- Chapter 9: Municipalities
- Chapter 11: Large Reorganization
- Chapter 12: Family Farmers
- Chapter 13: Repayment Plan
- Chapter 15: Used in Foreign Cases
Mostly, the people get engaged and start the bankruptcy process or bankruptcy proceedings of either Chapter 7 or Chapter 13.
- Chapter 7 permits the people to ignore the other debts which have some unsecured debts like credit card debt, personal or payday loans, medical bills, utility bills through the Chapter 7 discharge. Moreover, this chapter is also known as straight bankruptcy.
- On the other hand, Chapter 3 provides the person to regroup the debt and also make the payments to the creditors over the period of 3-5 years. Moreover, this chapter is utilized by the people with the short term financial occurrences like illness, large or unexpected bills or medical bills, job loss and many more.
How To Respond If My Tenant Bankruptcy?
For everybody that is involved in bankruptcy experiences the stressful journey. Moreover, there are some preventive criteria that the property managers or landlords could take for executing the thing effortlessly.
- Set out eviction legal proceedings before the tenant files for the case.
- Acknowledge the exceptions.
- Proceed tightly with the bankruptcy trustee of the tenant.
If the tenant still stays in the property even after the registration of bankruptcy, then the claim for the rent of that period is known as the administrative claim. So, what is it? Well, the administrative claims are said to be the post petition claims that are basically paid in the lead of any other claim in the bankruptcy, even if the tenant has filed the Chapter 7 or Chapter 11 bankruptcy.
Moreover, it is more important to get the gist of Sublease Contract.
Tenant Bankruptcy: Can They Stop Paying Rent?
Well, there are some considerations in which the tenant could not expand to pay the rent and hence is willing and able to leave the premises. Therefore, in such situations, the tenant could allot the lease to the new tenant.
What if the tenant has stopped paying the rent after the registration of the bankruptcy or else neglects to execute the obligation mentioned in the lease on time? In this scenario, the landowner could easily file the motion looking for the alleviation from the automatic stay of the tenant. Additionally, the court could also issue the order obliging the tenant for rejecting the lease or paying the rent.
What Should I Do If My Tenant Files Chapter 7?
If you are concerned and looking for the answer by what if my tenant filed chapter 7, then this would be considered as the perfect segment for you.
Well, after the automatic stay the tenants will have to either take over or else reject the lease on which they are.
For accepting or rejecting the lease, the tenant gets the time of 60 days.
What Should I Do If My Tenant Files Chapter 13?
What if your tenant filed chapter 13? Well, it is a kind of reorganizing the financial health instead of an absolute liquidation as well as a fresh start.
When the tenant registers the Chapter 13 bankruptcy, the debts of the person are regrouped into the payment plan that would be having the debtor repay creditors for over 3-4 years.
What To Do To The Subtenant If He Is In Bankruptcy?
Did you know that you could record the claim for any debts owed in no time after filing the case. Well, it is also important to go through the question of which is what to do to the subtenant if he is in bankruptcy?
So, when the party to a lease files for bankruptcy protection, the consequence of bankruptcy laws upon the party’s lease can be momentous. It is also indispensable for one concerned in the leasing of the property to interpret the consequences of the bankruptcy laws on the lease transaction.
Hence, this is particularly true for a subtenant in the context of the sublandowner’s bankruptcy. Whereas, the subtenant’s rights in this consideration are slighter, the subtenant might utilize the mechanism for defending the involvement of the subtenant.
What Else Can You Do?
Moreover, if the tenant refuses the lease, then the landowner could call for some or all of the following options. It includes:
- Past due rent or cost along with the associated damages.
- Unpaid fees or rent induced by the bankruptcy filing.
- Damages created by the lease rejection up to the rent of 1 year.
Moreover, it is also important to pen down that the automatic stay would be pausing any assemblage of the past due rent, when the tenant is lawfully involved in continuing paying rent till the time the lease remains active.
Along with this, if the tenant remains in the ownership of the leased promises after registering for the bankruptcy, then they are involved to pay the post petition rent to the landlord, hence, recording those rent payments ongoing as long as they continue in the unit.
Final Thoughts
What could be the biggest worries for the landowners of having a tenant? It includes the tension of the tenant who halts the rent. Hence, if such a scenario arises, or the tenant does not move out of the property, the landlord is left with no other option than going through the eviction process in the bankruptcy case for acquiring the ownership of the property.