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Right place for this? Non payment of rent and LL BK

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  • Right place for this? Non payment of rent and LL BK

    I've posted on other sub-forum's on this board, but this is a hole other issue.

    my rental property will be surrendered in my chapter 7. I will be filing early next week. The tenants found out and put a stop payment on April's rent. Now I've read the thread about collecting rents and surrendering the home. My attorney has advised me to continue to collect rents, while I know some here say not to. Since they aren't paying, this is their second bounced payment, and have verbally told me that they don't have any intention of paying April's rent nor any other rent. Do I start the eviction process or do I let the trustee handle it, or do I hire yet another lawyer to deal with this situation?

    I just want to run away to find a rock to hide under and cry!
    **Filed - 5/4/11 Bring it on! ** 341 - Scheduled for 6/6/11 that wasn't so bad, but continued **Discharge - (after 8/5/11)
    **Credit Scores - 5/4/11 - EQ = 590**EX = 656**TU = 702

  • #2
    I know how long (and how much $$) eviction proceedings can take in the state we had rental properties're not going to find someone else to rent it while you're in Ch7, are you?

    It basically sounds like they're taking advantage of what they know of your situation. Frankly, I would keep the court filing fees in your pocket and let the trustee/courts/bank deal with them. I wouldn't give it another thought, beyond advising the trustee at your 341 that there are tenants in and they put a stop pay on April rent and told you they didn't intend to pay anything else.

    It will be okay.


    • #3
      1. You have the right to collect rents up to the day you file the Chapter 7. On that day the right to collect passes from you to the Trustee. If you collect rents from that moment on you better be prepared to turnover the $$ unless there is a valid assignment of rents in your mortgage documents.

      2. Since you are filing within a week let it go. If there is a lease involved the lease should be disclosed on Schedule G. If the tenants are in breach of the lease or simply owe back rent (month-to-month basis), the amount of the past due rents should be listed on Schedule B as a receivable.



      • #4
        Originally posted by despritfreya View Post
        1. You have the right to collect rents up to the day you file the Chapter 7. On that day the right to collect passes from you to the Trustee. If you collect rents from that moment on you better be prepared to turnover the $$ unless there is a valid assignment of rents in your mortgage documents.
        And if there is an assignment of rents, you need to be prepared to turn that $$$ over to your lender.
        All information contained in this post is for informational and amusement purposes only.
        Bankruptcy is a process, not an event.......


        • #5
          They have informed me that they will be using their deposit for Aprils rent, not allowed in my agreement. They also informed me that they will be out by the end of May. So now they are going to owe another months rent and all the fee's. Just so I'm prepared, how does this all work in the BK? Does it help or hinder me?

          From my understanding, they would be considered breaking the lease (ends 2/12) since they aren't paying and will be out before my BK is final. I just want to make sure I'm not surprised a few months down the road with a lawsuit from them. And yes the ARE that type of tenant.
          **Filed - 5/4/11 Bring it on! ** 341 - Scheduled for 6/6/11 that wasn't so bad, but continued **Discharge - (after 8/5/11)
          **Credit Scores - 5/4/11 - EQ = 590**EX = 656**TU = 702


          • #6
            No rocks! No crying! At least not for this. It's hard to not feel stressed by things like this when you're gearing up for a bankruptcy but this WILL work itself out.

            Just list April rent as money that has yet-to-be-received in your BK paperwork. You've got the proof that payment was stopped. Let them get a taste of the trustee. Doesn't that make you want to smile just a little bit?

            I'm no expert, but I don't think they'd have much luck suing you for anything, since they're the ones that breached the contract by stopping payment and refusing to pay future months' rent. If they were smarter, they'd realize they still have obligations and a nice shot at cash-for-keys. But they just did something really dumb... not your problem!
            OK - from now on it's not a "Bankruptcy." It's a "Weight Loss Program." I'm in. Sign me up.


            • #7
              I'm curious about one thing .... how does the trustee go about collecting from the non-paying tenant? Wage garnishment or bank levy or some other avenue? Does this hold up Bright Eyes's Bk closure while the trustee does this?


              • #8
                If I recall correctly, the trustee starts off with a nice little letter, in this case to the renters, introducing him/herself and letting them know where they can send the unpaid rent. I'm not sure what the next step would be if they're dumb enough to NOT pay the trustee, but I'm guessing it wouldn't be terribly pleasant. It shouldn't hold up the case discharge, but it might slow down the final closing of the case.

                I suppose I'm being kind of mean in my view of the renters. My It's-past-my-bedtime-and-I-don't-mind-thinking-sadistic-thoughts-about-someone-who-kicks-another-person-like-Brighteyes-while-they're-down mentality must be on high volume. Sorry, all. It's just nice to know there are some checks & balances in the system that keep BKers from being victimized in a situation like this.
                OK - from now on it's not a "Bankruptcy." It's a "Weight Loss Program." I'm in. Sign me up.


                • #9
                  Thanks, Peeps. Gotta confess the reason I asked is I have a similar situation. I have a renter who is now 2 months behind on the rent, and have asked her to leave by end of month. She is a single mom with 3 little kids, who moved in last August with her fiancé. In the course of her time there, I have had multiple bounced checks from them, stopped payment on a check, fiancé left after Christmas and I reduced her rent $200, Jan & Feb rent got paid in late Feb after she got her taxes back, stories of getting assistance from Jobs & Family, stories of her rent money being stolen .. I am exhausted.

                  Unfortunately, she has a strange ploy she pulls out when told she must leave .. there is something in the walls, the house is unsafe for her and her children. This came up when fiancé was still there, we came out immediately, did a thorough search, no evidence of anything. Put out all kinds of traps, etc, just in case. The rent was late at this point. Now the subject has come up again. Because the rent is late. Otherwise, we don't hear any complaints. I am going to call the mysterious thing in the walls the "I can't pay my rents".

                  We spoke with an exterminating company who basically said it was most likely a mouse and they couldn't do anything different than we were doing, but would be happy to come out and set mouse traps for a considerable fee. The tenant would say "it can't be a mouse, it's huge, like a raccoon!" Doesn't matter when my husband explains it's almost impossible for that to be based on the construction of the house. That the ext. company said even a mouse would sound amplified through the walls.

                  I have tried to be nice, to work with her, even planned on letting her stay in the house once we stopped collecting rent before we file BK. She would tell me every single day she would bring the money by that night. At this point I am so fed up with her BS, I just want her out. But at the same time I have compassion for her and will prolly let the rent go because I don't want to cause a single mom to have a judgment against her, or an eviction, or sic the trustee on her. Even tho I know she is a compulsive liar, she is young and not very bright, I just don't want to put someone else in a bad situation.


                  • #10
                    Just a little update, as I'm feeling very used and manipulated by my (insert every swear word you know) tenants. They said they would be out by the 21st of this month, but they just sent me an email saying that they won't be out unto the 30th OR so. Oh and they knew we would understand, WTF!!! I think that takes balls to ask to stay in someones house while not paying the last two months rent. Someone please tell me the trustee WILL come after them for the money.
                    I know that we haven't paid the mortgage since October, but we have been honest and tried everything we could to save the home. WF won't work with us and we just can't afford renting a shoebox in one state and keeping up a home in another state. We rented the home because we couldn't sell it. So wish we would have done this over two years ago. Would have saved tons of money and heartache.
                    So again, the trustee WILL go after them for the money right? Oh and I'm not expecting to see a penny of that money, I just want them to understand that everyting we told them, in writing, would happen. Mainly that the trustee would collect the rent the day we filed. Okay I'm done
                    **Filed - 5/4/11 Bring it on! ** 341 - Scheduled for 6/6/11 that wasn't so bad, but continued **Discharge - (after 8/5/11)
                    **Credit Scores - 5/4/11 - EQ = 590**EX = 656**TU = 702


                    • #11
                      Brighteyes, I feel your pain .... my tenant is still there as well. I have the paperwork for the eviction, will probably file tomorrow. I was hoping the threat of eviction would get her out, because once I file it she then has at least 28 more days!!! Aauuurrggh!!! We even had to call the police recently ... she was accusing us of "breaking into" our house. The cops said "get a new tenant!". My only problem with the back rent situation is that is is going to hold up our BK closing. According to HHM, the discharge timeline should be normal. But this girl is a waitress, how long is it going to take the trustee to collect the rent owed? An eternity. plus I am not even sure if she still works there. And in the meantime, we are stuck in limbo. Wanted to sell our vehicle after bk, and now we will have to wait because we are not supposed to mess with the status of anything (assets) until we close. Are you concerned about that at all?
                      In my previous post I said I hated to sic the trustee on her. At this point if he wanted to set her on fire and said I could watch I would bring some marshmallows. It sickens me that my tenants have contributed greatly to my need for bk, and now are compounding my pain by drawing out my closing. She is now able to put my life on hold for an indeterminate amount of time. I realize she is not a single mom down on her luck, she is grifter and scam artist. Why do these people have the upper hand?
                      Last edited by StrawberrySu; 05-15-2011, 09:03 PM.


                      • #12
                        I recently had a tenant approach me as if THEY had the upper hand and could dictate what happens with my property because they know it's in foreclosure. I kindly explained to them that as long as the property remains in my name, my intention is to collect rent as usual. I let them know that they could leave if they felt uncomfortable with the situation, but I also had a 3-day notice posted to make it clear that I WILL begin eviction proceedings if payment is not received. I am very lenient (to a fault) when it comes to late payments...but when a tenant tells me that they will not pay rent while they are living in MY property-well then we have ourselves a little "situation."

                        If/when the trustee asks me to hand over the rental proceeds, I'll do that without hesitation. But as long as I am subject to calls about broken toilets and faucets (not to mention that I'm liable for anything that happens on the property) I absolutely expect to get that rent check (money order or cashier's check preferred) each and every time the first of the month rolls around.
                        Non-Consumer Chapter 7
                        December 2011


                        • #13
                          Fortunately, we have not had problems with our tenants. Knock on wood...... I agree with the other posts, as long as our names are on the title and the trustee does not want to sell the property then the tenants will pay the agreed rent or be evicted. As for the rent, we keep it unless the trustee demands it, which he has not. We also keep the rent and don't pay the mortgage for any property we want to get a lien adjustment. That process is just starting now. We have to be one to two months late to get the banks attention. If the rent does not cover the mortgage payment, we send in a partial payment, at least until we are ready to file for a lien adjustment. Only one bank has demanded the rent and we told them they are free to go collect it. Just let us know so we can cancel the property management contract, turn off the water, cancel the lawn service, etc. We told them that we are not bank employees that collect rent for them. They declined to collect the rent and so far, about 3 months, have not brought up the subject again. If they really want the rent, we plan to use that moment as a segue into a deed in lieu. We will see how it works out.

                          As for the tenant, pay or leave until the name on the title gets changed.
                          Chap 7 Non-consumer --Realized headed for bankruptcy Nov 2010 --Started planning BK7 Spring 2011 -- Filed Sept 2011 -- 341 & Continued 341 Meetings Nov 2011 --No Asset Case Nov 2011 --Discharged Jan 2012 --Closed Feb 2012


                          • #14
                            It sounds like any rent you would get from the tenants before you file would go to the BK trustee. And quite frankly, since the tenants themselves are secured creditors (i.e., they have lent you the deposit, which you of course, doing what you are supposed to do, put it in escrow), they have the right to recover it - and by not paying the rent, they have essentially recovered it. If you had not put the deposit in escrow, you would have committed fraud, so your debt to them would not be dischargeable. I'm sure a trustee would consider it the same way.

                            And since you would not be owning the property after the filing date, you would not have the legal right to collect rent. OTOH, the trustee would. Actually the trustee would probably consider the missing April rent as a receivable to the BK estate, and force the renters to pay that, and make you pony up the escrowed deposit, or post-filing cash, if you had fraudulently confiscated that deposit - with the lease going forward a matter between the trustee and the tenant.

                            I'll speculate that the attorney had advised you to continue to officially collect the rent - but not to bring out the heavy guns to force payment. If the tenants don't pay, they just don't pay. In the end, you either have the rent, or a receivable for the rent - either of which go to the BK estate.


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