I’m sure there are specifics for my state of Utah, but I’m wondering what is the general relation of collecting rent and/or eviction when a tenant files bankruptcy?
Dean
Bankruptcy puts a hold on all civil proceedings until you get permission from the court to proceed. Don’t do anything until you get relief from the court. Tenants are liable for rent while going through bankruptcy. You can probably write off any money owed, but you should get current rent.
All is not lost. You can rid yourself of that stuff and re-rent the unit to a tenant who is not so payment-challenged. Now, if you wish to strictly comply with bankruptcy laws, the conservative, lawyer-recommended approach. It also offers unofficial, practical solutions that, under normal circumstances, will allow you to return a unit to active income production. Of course, these will carry some risk of flouting the pro-debtor bankruptcy laws and incurring the wrath of the tenant, trustee and judge. The immediate impact of a tenant bankruptcy is an automatic stay goes into effect the moment the petition is filed, regardless of when you are notified. Therefore, once any employee of your facility learns a tenant has filed bankruptcy, all personnel should cease collection efforts against the tenant. Unless you take action to lift the automatic stay, the following rules apply:
- No telephone calls may be made to the tenant for the purpose of attempting to collect on his account, nor can any letters or dunning notices be sent for that purpose.
- None of the personal property in the storage space may be sold or otherwise disposed of.
Well, if tenant haven’t file any bankruptcy yet, You can sell his stuff at auction without fear of reprisal because no automatic stay is yet in effect. However, make sure notices and other steps leading up to the sale, as well as the sale itself, have been done in strict compliance with the laws and requirements in your state.
Is the question related to storage units or residential rentals? Selling tenants’ possessions is not available as remedy for residential evictions in most states.
Residential rentals. We haven’t gotten to the point of the sheriff removing the tenants items. I’m at the point of waiting to hear when the hearing with the judge will be. That will be “within ten days after the defendant’s answer was filed” which was 9/25/2008.
The reason I’m asking is because with priorly speaking to the tenant, he mentioned that if I don’t lower rent, he will be forced to file bankruptcy. Well, as long as I can out pace him before that filing, I can get him out of the house.
Dean
It’s a bluff. Proceed with your eviction and worry about BK if he files.
ooh…the old “call the bluff” trick.
:bobble
Welp. The judge entered the Order of Restitution for eviction. The tenant told me flat out that he’ll have his bankruptcy filed within two weeks. Weee! Utah treble damages are up to nearly $12,000 at this point. Is it worth pursuing to the bitter end? Is it worth contributing to the pool of human animosity? On one hand I do feel somewhat saddened that there aren’t good relations between everybody. On the other hand, I understand that the point of it all is to run a profitable business - if you give an inch, they take a mile.
Anyways, I’ll probably have to file a judgement against this guy’s credit if I want to collect anything. In a bankruptcy, do those get wiped out? Can they be brought up later after the bankruptcy time has expired? Should I wait till after the bankruptcy has expired and then place the judgement?
Dean
Depends upon the type of bankruptcy. If the tenant has income and assets, a Chapter 13 bankruptcy will establish a payment plan to satisfy all his debts over time (3 to 5 years in most cases).
If the tenant meets the means tests, then he may be allowed to proceed to Chapter 7. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. Unless your tenant can overcome the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor’s consent) or will be dismissed.
New update. Judge ruled in my favor. Obviously. Tenant will be getting 72 hour notice hopefully today or tomorrow. Tenant’s most recent game is that he is refusing me to show the property. Cute. However, there is a provision in my contract that states I can enter the property at any time I chose as long as I give reasonable notice. Honestly, I’m hoping that the tenant causes significant damage to the property; it would make it easy to justify to my mortgage company that the house isn’t worth anywhere near what I owe. My honest best case scenario is that the tenant burns the place to the ground and I collect insurance.
Anyways, how much of an “@ss” should I be about entering the property to show it to buyers? Also, can the tenant’s actions be prosecuted in some manner?
Dean
Most states don’t allow forcible entry. That means you don’t go in if the tenant is there and doesn’t let you in, regardless of any notice you have given. If he’s not there, there’s nothing he can do about it. Schedule the time around when the tenant is not in the property.
On a side note, you shouldn’t show a property when a tenant is not cooperating. There are many things tenants can do to tank a sale or make it harder to sell.
The judgement should be filed by Monday. I have all the paperwork ready for a garnishment against the bank accounts he’s used to pay rent with. I have continual garnishments against the possible employers he has. However, he keeps threatening with bankruptcy. As long as I can get that garnishment on his bank accounts, I can get something, I figure. Just the other day, I remembered from my legal law class the statute of limitations. I’m wondering, should I file the garnishments as soon as possible? Or, should I wait till after he comes out of bankruptcy and file them then? Does anybody know the statuate of limitations time line? I live in Utah if you happen to know that one specifically. Or, is it better to file those garnishments as soon as possible?
Once the bankruptcy is filed, you can not proceed with any debt collection efforts without the bankruptcy court’s permission. If the bankruptcy discharges your tenant’s debt to you, then there is nothing you can do after bankruptcy.
I suggest you proceed as quickly as you can. However, wage garnishment and bank levy don’t pay you immediately. Depending upon your state law, the debtor or the employer has some period of time to answer the writ of execution (maybe 30 days).
The debtor may file a claim of exemption. You can not garnish all of an employee’s wages. You can only take 25% of his discretionary income. For example, 30 times the minimum wage in your state is the weekly base income. Any income beyond that is discretionary income. Only 25% of the amount of weekly income that exceeds the base amount may be garnished. Certain income is exempt from garnishment. Social security income and child support are 100% exempt.
File your paperwork as soon as possible before the bankruptcy is filed, but don’t expect a quick resolution.
A new occurance in my favor. The sheriff delivered the 3 calendar days Order of Restitution to be out on Friday. 3 calendar days is Monday. There’s not likely any chance this guy will be able to get a place ready over this weekend. He called me up and is wanting me to let him stay until Wednesday. Now, he has verbally stated that he has about $3000 for rent for September and October. (That’s not full rent, by the way). So, what I’m thinking is that I can get him to pay all of September’s full rent, plus the late fees if I let him stay a little longer. What I’m wondering is about that 3 calendar day Order of Restitution. If I meet with the Sheriff on Monday and state that I’m allowing the tenant to stay longer, how does that affect this 3 day Order of Restitution? In the Order of Restitution, it states “you are commanded to, at the plaintiff’s direction, enter the premises by force”, etc. Will the Order of Restitution hold if I direct the Sheriff to return on Wednesday?
This question has to be answered by your court and law enforcement officials. My gut feeling is that if you grant an extension, you have to start all over with a new writ.