If my tenant is filing bankrupcy and has stopped paying rent, what are my options?

I have a condo that is managed by another company. The company called me saying that my tenant is filing bankruptcy and stopped paying. They started an eviction process trying to evict the tenant. I’ve been out of work for 7 months and just found a job. I can’t afford the mortgage payment myself. If they don’t pay me for 2 months then I have to file bankruptcy. My morgage payment and home equity loan is more than or equal to how much my house is worth. What should I do? Should I file bankruptcy too? What are my options?

Asked on March 14, 2011 under Real Estate Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Filing bankruptcy means your tenant can get out of having to pay your rent. You can evict him--you don't need to let him live there rent free--but that does not help your financial situation. You have three options, of which 1), 2), and 3) are better and can be done altogether or one after another; 4) is a bad option. (Obviously, if you can find a replacement tenant fairly quickly after eviction, you may be in decent shape.)

1) Speak with the lender, explain the situation, and see if they can give you even temporary relief--maybe you don't have to pay for a few months, or they'll lower your payment for 6 -12 months while you make other arrangements (e..g find new renters).

2) Speak with the lender and see if you can get them agree to a short sale; then see if you can sell the property to get out from under it.

3) File for bankruptcy to get out from your obligations; note that in chapter 13 (if this is primarly investment property, not where you live), you may be able to use the proceeding to reduce what you owe to the current market value, which may be something you could carry. Speak with a bankruptcy attorney.

4) The bad option--walk away from the debt. It's bad because it will affect your credit almost as much as bankruptcy while still theoretically allowing the lender to sue you for any balance you owe after the property is foreclosed and sold.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.