So Mark and Jean are renting out thier home in Phoenix. They would be here, living in their home had life not taken some turns. Mark has been currently deployed to Arkansas, and isn't sure where he will be going after that. Jean and their daughter are hanging out with him. They have been there two years thus far.
While they have been away, I have been coordinating renters for them. They had one for six months. That family moved out. They had another for two months. That family moved out too. Then they had a third who have been graciously hanging out, keeping the place spit-shined (I drive by) for a year now.
Last month Jean sent me an e-mail. Her current tenants filed bankruptcy. "That isn't a big deal is it?" she asked.
Well yes. It can be. But it doesn't have to be. I immediately e-mailed her her and said "CALL ME!" The subtext was, "Do I have a horror story for you."
There is a big difference between owning a gazillion homes with a partner and owning one you weren't planning on moving out of in the first place. I didn't exactly want to give Jean my horror story, but I wanted her to be prepared. And in doing so, I told her all I know.
Bankruptcy laws are federal, not state-by-state or on a case-by-case basis. If a tenant opts to file bankruptcy on their landlord they can do so. But don't expect the landlord to be all that excited. And, a landlord can petition the court to ask your tenants to leave sooner than later (though Howie the Hack never got around to it--they left on their own instead). But, if the bankruptcy takes six months before the hearing and you do nothing or the court doesn't care, the tenats stay six months rent-free before they give up the house.
I also told Jean, the best case scenario is the tenants kept paying rent. After all, if they have a bankruptcy, they aren't going to rent a home as nice as theirs for a very loooong time. So, it is in the tenants' best interests to pay for where they live.
Monday night I got a text from Jean. She got December's rent. It was music to their ears, as they had no idea what they would do if the tenants didn't pay. Mark has a top-secret clearance that will go away if he has a foreclosure or short sale on his record. And, they aren't in a position to carry the extra mortgage for more than a month or two.
I wish my bankruptcy folks had been half as honorable. But, at least they left. Otherwise they would have stayed from June to November rent free.
Friday, November 06, 2009
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3 comments:
The BK laws are very specific when it comes to bankrupting on a landlord versus a mortgage company. A tenant may include missed rent in their bankruptcy petition. However, they may absolutely NOT include future rent. This means that if they are 4 months behind when they file, that 4 months goes out the window as far as the landlord goes. However, when the next rent date is due, they either pay in full or the landlord has every right to evict. The landlord simply cannot include past due amounts that were initially included in the original BK petition. Howie the Hack should have told you this and should have filed eviction. Howie the Hack needs to have his license suspended.
By the way, although BK is governed by federal law, each district has been granted the right to interpret the rules according to the needs of their constituents. Each District also has their own Addendum's which effectively changes the rules as they pertain to the specific district. In other words, each district has their own set of "rules" that they play by. This essentially means that just because you are allowed to do something in the District of Arizona, it does not mean the same can be done in the District of Alabama.
Very interesting points. Thanks my friend!
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