You may be right here, if there is a balance owed, or arrearage. I’m not really certain as to what is technically accurate within the law. Certainly if an arrearage owed was left out, that would violate the intent of the law, and unfairly pay one creditor over another. That is not what I am referring to here.
If there is no balance owed, then you are not really a creditor… In a ch 7 case, where liquidation is being sought, the Debtor simply wipes out those debts but deosn’t list you as a creditor. As long as you are not listed, then protection under the Bk laws do not exist for new creditors, following the BK, and that is more or less the scenario that I refer to here… Just commenting on what I have done in a few instances, successfully, but maybe I need to ask a few questions of a Bk Atty, for clarification purposes…
Just another one of the benefits of CRE… as it makes you think of situations in advance of crossing that bridge, which furthers the knowledge base.
Posted by Kristy-AZ on October 30, 2003 at 18:05:16:
Here’s the situation.
We showed our property to a family that wants to L/O the property on the 14th of Nov. HOWEVER!, they said they were planning on filing Bankruptcy in the next few months to get rid of their high debt.
I called my attorney to see if there was any forms that could be signed that could keep us off the Bankruptcy, and he said there are, BUT they probably won’t hold up. We would have to get a Lift Stay and the tenants won’t have to pay the rent while we are trying to get them out.
HAs anybody been through this? I know we need to fill this property, but I think I would rather wait another 30 days, than have to deal with a 6 month legal battle.
If they leave you out of the filing of the BK, by not listing you as a Creditor, they are essentially exempting you from any Bk protection. There is no guarentee that they will say they would leave you out (unnamed), and then they do… well then you know who you were dealing with… dishonorable folks, of which you would have had trouble with anyway…
I just had a closing today with a young guy and his fiance’ who L/O a place from me 14 months ago. He was ready to file BK a few weeks after we first spoke about the L/O deal… He said he would leave me out… I felt confident with his reasons for filing Bk, (business related), and he did as he said… left me out…
Never heard a word from the Bk court, he paid as agreed, and today we closed… cashing me out… I’m not saying that your deal will go the same way, but this is possible if the proposed T/B is credible, of which you will have to make that determination.
Let’s face it… if you are dealijng the L/O business, you had better get used to seeing and dealing folks in Bk… You will be seeing lots more of them based on the average consumers debto load…
Re: Bankruptcy & Tenants?? - Posted by B.L.Renfrow
Posted by B.L.Renfrow on October 30, 2003 at 19:00:57:
Your attorney is correct. While they might well intend to pay, you would have to be named as a creditor in the BK petition, and if they decided to stop paying, your only recourse would be to file a motion for relief of the stay, which could tie up a few months, with no rent coming in.
Wait! Get somone else! It gets ugly quick with BK and, depending on your state, you may not be able to do anything if they prove you L/O the house to them after they notified you of your intent to file.
Can you L/O after BK to protecttct yourself? - Posted by Tim_Cleveland
Posted by Tim_Cleveland on November 01, 2003 at 16:52:24:
JT:
In the case of L/O’ing to someone who is about to file BK, would there be any protection for you if you were to require them to file BK before you consummate the L/O? This way they can’t say one thing and do another. Is “debt” or other financial obligation incurred after the filing by nature exempt from the BK? But then again I think maybe I remember hearing about the fact that by filing BK, you can’t incur any new financial obligations???
Re: Bankruptcy & Tenants?? - Posted by B.L.Renfrow
Posted by B.L.Renfrow on October 30, 2003 at 23:29:20:
JT - you wrote, "If they leave you out of the filing of the BK, by not listing you as a Creditor, they are essentially exempting you from any Bk protection. "
But my understanding of the BK code is that a debtor is not permitted to pick and choose which creditors to list; they’re all supposed to be listed on the petition. Of course, if one “accidentally” forgets to list a creditor, well, then that creditor wouldn’t be bound by the automatic stay. But I’d think not listing a mortgagee or landlord would raise a big red flag with the trustee, who would likely object, realizing the debtor has to have housing expenses somewhere. Or, am I missing something here?
Generally, obligations incurred in the 90 days prior to filing a Bk aren’t dischargable anyway… It is thought that these obligations have been incurred, while planning to file a Bk… this is fraud, so they are not dischargable.
Not sure about a Ch 13 and recently acquired debts… except that a Ch 13 is going to repay these debts anyway; both current and past, so no worry…
“how much do you keep in reserve for each property that you L/O?”
I really do not seperate it out in that fashion… per L/O deal… Fortunately or Unfortunately, I usually have enough things turning over that I don’t peg a reserve per each property, but more or less keep an amount overall… If I had to seperate it out, I would keep at least 3 to 4 months of payments in liquid reserve, as that is about how long you could be tied up with a non-paying tenant for either eviction or Bk… untill re-renting…
“what’s the ratio between the homes that you L/O vs. retail?”
Far more retail flips… I only do a couple of L/O’s per year; maybe 2, 3 or 4… to a dozen or 15 or more flips. This day and age, with low interest rates and easy qualifying standards, many folks can qualify for funds that used to need a L/O situation. Therefore, the quality of the average L/O tenant has been reduced to that of a poor bet… That is the reason why I would rather select someone who, in the past, has had a pretty good record but had fallen on harder times. Maybe due to a business failure or marriage breakup… and they will once again regain a decent credit rating following the discharge of a Bk… I much rpefer this over someone who has had financial (cashflow) troubles their whole lives… Leopards don’t change their spots, you know.