Collecting Rents After Filing A Chapter 7 - A Must Read

[arthoralbert]

Chapter 7 bankruptcy on your credit file will scare off some lenders until you've rebuilt your credit score. If you are planning on buying a house after a Chapter 7, choosing the right home loan and waiting for a certain period of time to pass can help you qualify for the best rate on a new mortgage.

[ssmdem]

You right you can't put that in your lease but you make it very clear verbable that if you don't want to repair anything and that is why the rent is half off. If they do make you repair something then you tell them the lease will be over and they will have to move out based on the month to month lease..I have a tenant in this same situation and he understand the deal we made. He is very happy to comply with making the repairs. I told him worst case the furnace goes out. I'll refund his last months rent and he will need to move out asap.

That makes sense. I can see why it can't go in the contract. I'm hoping to be able to do this with someone I know. There are so many in our community that are struggling right now, and I'm hoping to be able to help someone out by charging the lower rent. We don't want to move back into the house ourselves - wrong school district -- but I'm hoping to be able to help someone I know until the bank plays their card. The only thing I can imagine them possibly having issues with might be the A/C. Everything else is new and should be fine.

[ryan44]

Be very careful about this language in a contract. It could be a violation of your local housing regulations as well as state regulations concerning rentals. Just because a debt was discharged in bankruptcy doesn't mean that you don't have to follow local rules / laws as a landlord.

You right you can't put that in your lease but you make it very clear verbable that if you don't want to repair anything and that is why the rent is half off. If they do make you repair something then you tell them the lease will be over and they will have to move out based on the month to month lease..I have a tenant in this same situation and he understand the deal we made. He is very happy to comply with making the repairs. I told him worst case the furnace goes out. I'll refund his last months rent and he will need to move out asap.

[newbie2]

As of yesterday, we are discharged and closed. We surrendered our home and our rental property -- we are not paying either mortgage and want the banks to foreclose. However, we are in Florida and know full well this process could take forever. It's been a year on our primary residence with no word from the bank. The rental property we quit paying on in October, so it will most likely be longer for it to foreclose. Tenants had moved out before we filed for bankruptcy, so it is vacant now. We have a neighbor keeping up the lawn but other than that, it is empty (has already been broken into once) - so do have some minor damages that we would need to take care of to rent it out again. My attorney told me that once the bankruptcy is discharged that the property reverts back to us (not the estate) so we are free to rent it out if we choose to. This correct info?? Just wanting a second opinion. I would like to repair the damages and rent it out on a month to month basis. We would be completely up front with incoming tenants and intend to charge half the normal rent due to the situation. We also want to put into the contract that we are not responsible for repairs that might come up after they move in -- i.e., I'm not sinking any more money into this house. The normal rent for houses in the area is $1000 and we would be charging $500 so I feel like this is fair. It is a newer house too, so I foresee nothing that could come up that would cost major funds for the tenant. Bottom line, even if it did - they could just pack up and leave. We aren't charging a deposit. Essentially I just want someone to take care of the place so we don't have to and bring in a little money to offset the rent we are going to have to be paying when we move from our home. Do you see anything wrong in what we want to do? Are we legally okay? In case it matters -- the 1st and 2nd mortgage on the rental property are both held by the same bank.

Be very careful about this language in a contract. It could be a violation of your local housing regulations as well as state regulations concerning rentals. Just because a debt was discharged in bankruptcy doesn't mean that you don't have to follow local rules / laws as a landlord.

[ssmdem]

As of yesterday, we are discharged and closed. We surrendered our home and our rental property -- we are not paying either mortgage and want the banks to foreclose. However, we are in Florida and know full well this process could take forever. It's been a year on our primary residence with no word from the bank. The rental property we quit paying on in October, so it will most likely be longer for it to foreclose. Tenants had moved out before we filed for bankruptcy, so it is vacant now. We have a neighbor keeping up the lawn but other than that, it is empty (has already been broken into once) - so do have some minor damages that we would need to take care of to rent it out again. My attorney told me that once the bankruptcy is discharged that the property reverts back to us (not the estate) so we are free to rent it out if we choose to. This correct info?? Just wanting a second opinion. I would like to repair the damages and rent it out on a month to month basis. We would be completely up front with incoming tenants and intend to charge half the normal rent due to the situation. We also want to put into the contract that we are not responsible for repairs that might come up after they move in -- i.e., I'm not sinking any more money into this house. The normal rent for houses in the area is $1000 and we would be charging $500 so I feel like this is fair. It is a newer house too, so I foresee nothing that could come up that would cost major funds for the tenant. Bottom line, even if it did - they could just pack up and leave. We aren't charging a deposit. Essentially I just want someone to take care of the place so we don't have to and bring in a little money to offset the rent we are going to have to be paying when we move from our home. Do you see anything wrong in what we want to do? Are we legally okay? In case it matters -- the 1st and 2nd mortgage on the rental property are both held by the same bank.

[despritfreya]

T We have 4 kids (1 son with autism) so we have to be very careful since change throws him way off so I have to have a plan and work with him consistently so he doesn't spin out of control and regress.

You need to start thinking ahead. One of three possibilities:

1. Property has no equity and mortgage is not current - eventually lender will foreclose which means eventually you will be evicted.

OR

2. Property has sufficient equity to justify the Trustee marketing and selling it. If you are not the buyer and the actual buyer does not want you in the property, you will be evicted.

OR

3. (Extremely unlikely) The Trustee will walk away from the property which returns its "ownership" to the debtor, the debtor is current in the mortgage payments and wants to continue with the lease arrangements you have. I have never seen this happen but it is always possible.

No matter which way this goes, you need to begin the process of finding other accommodations so that the change in your son's life is minimized and well planned.

Des.

[Klynn6]

Sounds like the Debtor will be surrendering the property to the mortgage company. It also sounds like he understands he cannot collect rents (he will most likely have to turnover the $$ you paid after he filed to the trustee). If you are on a lease you are technically still bound by the contract you signed. However, your landlord is now the Trustee. Before you decide to "default" under the lease you should contact the Trustee to see what he/she plans on doing with the property. Tell him/her that you are the tenant and do not understand what is going on. If he wants rents paid he should tell you at that point.

Des.

Thank you for responding so quickly. I sent April's check certified mail and will continue to do so unless I'm told different by the trustee, I was worried he wouldn't cash or deposit it so I wanted proof that I sent it and that he received it. I will be putting a call in to the trustee today. We have 4 kids (1 son with autism) so we have to be very careful since change throws him way off so I have to have a plan and work with him consistently so he doesn't spin out of control and regress.

[despritfreya]

I'm a renter and my landlord filed Chapter 7 on March 17th, we only know because we are listed as a creditor because of our $1100 security deposit. I am a little confused by. . . I paid April's rent and he has deposited it. "17. Describe any increase or decrease in income reasonably anticipated to occur within the year following the filing of this document:Debtor not expecting to receive rental income in future" I want to know what this means.

Sounds like the Debtor will be surrendering the property to the mortgage company. It also sounds like he understands he cannot collect rents (he will most likely have to turnover the $$ you paid after he filed to the trustee). If you are on a lease you are technically still bound by the contract you signed. However, your landlord is now the Trustee. Before you decide to "default" under the lease you should contact the Trustee to see what he/she plans on doing with the property. Tell him/her that you are the tenant and do not understand what is going on. If he wants rents paid he should tell you at that point.

Des.

[Klynn6]

I'm a renter and my landlord filed Chapter 7 on March 17th, we only know because we are listed as a creditor because of our $1100 security deposit. I am a little confused by one of the statements on his bankruptcy and I'm hoping someone can help. I paid April's rent and he has deposited it.

"17. Describe any increase or decrease in income reasonably anticipated to occur within the year following the filing of this document:

Debtor not expecting to receive rental income in future"

I want to know what this means.

[ryan44]

Sure if its income then you need to report it to your lawyer before the BK. After the BK closes and the trustee didn't make it part of the estate...collect whatever you want. I'd give them free rent until your bk was over. Its your house and if you want to let them stay for free for awhile then I don't see the harm...different story if this was a rental investement property.

[sillywalks]

Does anyone know how this applies to someone renting out the basement of their primary house, which they plan on keeping in Chapter 7? Is there a problem collecting rent in that instance?

[ryan44]

Scooter we plan to do the same. It makes no sense what the bank said to Ryan .... if he does pay them, they won't foreclose! We can't get enough rent in our area anymore to make the payments, so it's a moot point with us. Why should we let the property sit empty and deteriorate, and get vandalized, maybe squatters, and we have to carry insurance? Come on! I don't see a darn thing wrong with it. Just have to be sure all my i's are dotted so my bk goes smooth. Good luck to you too!

Yeah I'm pretty sure as long as the Trustee doesn't include the rents after BK as part of the estate then your fine to collect Rents. Now i'm not sure how to take the first part of this tread but my lawyer seem pretty confident that I can collect rents and keep the money after my BK was closed.

[ryan44]

yes I collected before, during and after. It was included in my income specifically for the means test. In other words the trustee did have that info at the 341 meeting.

[StrawberrySu]

Isn't it interesting what seems to get the bank's attention. You can beg them to foreclosure and they don't listen. But if they think you're making a buck or 2, they go nuts. We are moving so will do the same as you, rent until they foreclose. How long we collect rent is up to them. I'm no longer in a hurry. Good luck

Scooter we plan to do the same. It makes no sense what the bank said to Ryan .... if he does pay them, they won't foreclose! We can't get enough rent in our area anymore to make the payments, so it's a moot point with us. Why should we let the property sit empty and deteriorate, and get vandalized, maybe squatters, and we have to carry insurance? Come on! I don't see a darn thing wrong with it. Just have to be sure all my i's are dotted so my bk goes smooth. Good luck to you too!

[StrawberrySu]

I have a rental that I have been collecting rents from before and after by Ch7 BK closed. My lawyer told me as long as the trustee doesn't ask for those rents as part of the estate then i get to collect them until the property is foreclosed. He said in most cases they don't as if they DO then they have to manage the property. My trustee didn't mention anything at the 341 meeting and I have been collecting rents ever since. Almost 6 months after my BK closed. I did start paying again on this loan for a short while to keep it out of foreclosure but recently stop making payment and just want this property to go into foreclosure. Interesting enough USBANK calls me and says since I have renters in the property I have to make the mortgage payments. Not sure what to think of that but I'm pretty sure I can collect the rents as my lawyer said so specifically. I don't think making a few payments changes anything as I did NOT reaffirm the debt with USBANK.

Hi Ryan! Did you collect rents during BK? Or did you stop, then restart after BK? If during, was the rental income included in your income? If after, how long did you wait? thanks!