Rent and Bankruptcy

Tenant bankruptcy can put a restriction on what you can do in collecting unpaid rent. As a landlord, however, you are still entitled to work within the system to recover the money owed by your tenant. Read on to learn more.

Eviction for Unpaid Rent

Usually, you can give your tenant a three-day pay or vacate notice if he is behind on rent. However, if the tenant has filed for bankruptcy, you cannot proceed. This is known as an automatic stay. You can evict for other reasons, such as for violating the lease agreement or illegal behavior.

Restrictions on Landlords

If you don’t follow the orders of the bankruptcy court and attempt to collect rent from your tenant, you could face penalties but you can file your own petition with the court. A bankruptcy judge will evaluate your petition and rule on whether to allow it or not.

Judgment of Possession

The exception to the automatic stay is if you were already far enough along in the eviction process that the judge awarded you a judgment of possession. If the tenant filed before you received the judgment, you must petition the court for relief from the automatic stay. The relief from the automatic stay doesn’t mean you can collect rent — it just gives you permission to proceed with eviction.

Proof of Claim

To get in line with the tenant’s other creditors and hopefully collect some of the back rent, file a proof of claim with the bankruptcy court. Keep records of the rent due after the bankruptcy filing because the court treats them separately. Inform the court of the tenant’s security deposit as well. 

Source: https://homeguides.sfgate.com/tenant-filing-bankruptcy-owes-back-rent-53174.html