When a tenant files for bankruptcy the term automatic stay comes into place. What does this mean? Well, it clearly means if you don’t have a clue then you should stand clear of it and let someone else handle the case lol. No joke. An automatic stay means that you can’t attempt to collect a debt or evict a tenant. Read that again please, because it’s a federal law to basically leave them alone until you go through LIFTING the stay.
Lifting the stay is not some easy task that takes a couple of days. I tell every owner that if a tenant files bankruptcy you are looking at around 45 days to get a court date and as the court to lift the stay. And just so you know WE DON’T DO THAT. An attorney has to be hired for them to file a motion to lift the stay so you can proceed with the eviction.
The total process is around 3 months for the entire eviction if your tenant files bankruptcy. And keep in mind that’s from the start of the eviction notice and not how long you wait to start the process. The average owner waits four months without rent before they start the eviction process. DON’T do it. Start now!
I’ve had three people file bankruptcy since 1986. I didn’t even understand this until 2016 when I had three evictions all in the same year where they filed bankruptcy. The red flags for all these people were the owner’s DID NOT run their credit. Had the owner not looked at their Mercedes (YES, they drove Mercedes) and nice clothes they would have found out they had done this many times.
One lady made $75,000 per year and is highly educated. If I told you about her job and title you would be shocked. She would file bankruptcy herself to buy time and then last minute cancel the bankruptcy. She was out around $525 for the filing and got 6 months rent for free. I won’t go into the details here and give any more unethical people some ideas, but she had repeated this process no less than 3 times that I found and her boyfriend who just happened to work at the sheriff’s office was part of it as well. He would put the utilities in his name and live there.
Just because this owner didn’t want to run the person’s credit he was out around $20,000 for legal fees, repairs and rent loss. ALWAYS screen your tenants!