Tenant 2 months behind on rent: Declared bankruptcy — any advice?
First time I’ve come across this but I have an office building and one of our top tenants has declared bankruptcy. I have other potential tenants that can take over. Any advice or lessons learned to share?
[{"id": "iaxd0gc", "text": "How do you know they filed bk?  Were you notified as a creditor?", "replies": [{"id": "iaxdt41", "text": "The staff they have using the office told us about it. I haven\u2019t tried to look it up online yet. I guess I should do that?", "replies": [{"id": "iaxu5v8", "text": "If you haven't been notified then it's not your problem.   You don't  know if it's a 7, 11, 12, 13 or whatever.  You don't know if you've been included, or re-affirmed.  I wouldn't worry about it.  Could be something they told their staff.  Who knows.  Do what you would normally do, but in an accelerated expeditious fashion if you can as per lease.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iaxd36u", "text": "Cash for keys.  Pay him to move out, get the new tenants in there.", "replies": [{"id": "iaxe1gb", "text": "So this would mean deal directly with the tenant and not file anything with the bankruptcy court and just get them out?  The contract does state I can terminate at any time for any reason with 30 days notice. Is that void if the tenant applies for bankruptcy.", "replies": [{"id": "iaxi2cz", "text": "Usually all actions are frozen in the bankruptcy process. However, a request for the tenant to vacate with no compensation to you will likely be approved by the bankruptcy court.", "replies": [], "depth": 3}, {"id": "iaxk1xh", "text": "once they file bankruptcy they may not be allowed to do that.  You don't generally get to pick who is in the bankruptcy or not.  Everyone is then the court approves the plan.\n\nThats basically the point of bankruptcy, you are asking the court to stay collection activities while you provide a plan to either liquidate or restructure.  Everyone impacted has a chance to go to court and accept or object then a judge decides.  \n\nYou can't generally make side deals, though obviously this is all complex, depends on state, and a billion other things so yeah talk to an attorney it isn't a \"oh when that happens you do y\" question.  Another possibility is they will continue business and the court will pay you the past due rent and they will resume their payment schedule, or ya know they are going out of business and you get to fight with everyone else for the crums.", "replies": [], "depth": 3}, {"id": "iaxutnw", "text": "If they DID file bk, it would be very bad for them to accept cash directly without telling the court.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iaxht0o", "text": "Look it up online. It will be with the US District Court for your area. You should receive notice and there will be a creditors meeting that you can attend or send a response for.  Any deal you make with the tenant at this point must be signed off on by the courts.", "replies": [], "depth": 1}, {"id": "iaxi6px", "text": "thats a solid attorney question.  I wouldn't do a thing until you talk to one.  Are they liquidating or restructuring?", "replies": [{"id": "ib1yvoa", "text": "I thought about it a bit and ended up sending a note to the tenant's bankruptcy attorney. I offered to forego the rent I'm owed in exchange for terminating the lease and signing a release.  I asked if the bankruptcy judge would have to approve.  The attorney got right back to me and shortly thereafter the tenant did too accepting the deal. The bankruptcy attorney said the court would likely approve it with no problem.  Feel like I dodged a financial bullet because I already have people ready to occupy the space.  :-)", "replies": [{"id": "ib27oxk", "text": "Awesome.  Glad it worked out.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iaxk2kc", "text": "First step would be to draw down their letter of credit as they are in violation of their lease, probs, and that is the banks money, not the tenants. The security deposit is property of the bankruptcy estate and can be claimed by other creditors, so I would take that before it is frozen by the courts. \n\nBut this is all going to the area when you would need an attorney if the money is sufficient. And as they say in the biz, time is of the essence. Get yours before it\u2019s tied up for years in court.", "replies": [{"id": "iaxvc2s", "text": "That's good advice /u/Fuck_You_Downvote", "replies": [], "depth": 2}, {"id": "iazjiyw", "text": "This is horrendous advice if they've already filed as it risks violating the automatic stay\n\nEdit: and by \"risks\" I mean this would definitely violate the automatic stay", "replies": [], "depth": 2}, {"id": "ib1ekoo", "text": "IAAL. This is really bad advice. Hire an attorney. Don't touch any money you have of theirs. Don't collect any rent.\n\nSend them a notice of default. If the tenant won't leave, you may be able to seek relief from the \"automatic stay\" and evict them. Don't do anything without counsel.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iaxr1mq", "text": "Attorney time. Notice of Default based on confirmation of BK records.", "replies": [], "depth": 1}, {"id": "iaxsf2k", "text": "Cash for keys, or file formal eviction notice right away to get the clock started.", "replies": [], "depth": 1}, {"id": "iay12dk", "text": "My first thought is play hardball and act fast. Evict them for non-payment plus any other defaults they may be in, but do NOT mention the bk in your notice to vacate. \n\nWrite off the back rent for now. Once they\u2019re moved out, have your attorney send a demand letter and start trying to collect. If they respond notifying you they\u2019ve filed bk, you have to stop collections and submit a claim to the court.\n\nYou don\u2019t want to accept any money from them at this point.\n\nIf your state provides a 3 day right to cure a default, enforce it to the minute and don\u2019t accept any partial payments or payments after the cure period. Doing so could allow them to claim the lease is in force and easily allow them to stay in the property for a few months while you work through the proper petitions and proceedings to evict them\u2026..and then you\u2019re back to square one on collecting the past due rent. \n\nAdditionally, courts can determine a payment made at this point was a preferential transfer. In other words, the tenant could pay you, then the court could demand you turn the money over to the court to be equally distributed amongst their creditors (which would include you).", "replies": [], "depth": 1}, {"id": "iaykxak", "text": "A federal bankruptcy judge has God-like powers over contracts and money, including leases. There are some great ideas here for deadbeat tenants, but they are the wrong ones for a tenant that may be insolvent or subject to bankruptcy proceedings. That is, of course, unless you enjoy poking a grizzly bear in the eye. \n\nPencils down, find a competent attorney who has represented landlords as creditors, preferably in the same district where the tenant filed - which may be in another state.", "replies": [{"id": "iazk15o", "text": "Half these comments are basically \"just violate the automatic stay, what's the worst that could happen\"", "replies": [], "depth": 2}], "depth": 1}, {"id": "ib19mh7", "text": "I\u2019m gonna be that guy, but absolutely speak with an attorney that deals with real estate and at least has someone in their office that does bankruptcy. A lot of well intentioned redditors will give you pseudo legal advice and while some could be technically correct, an attorney is going to have to be the one to defend any actions in court, so that\u2019s where I\u2019d want to get my advice from.\n\nGood luck with the deal, I hope you all can figure out an equitable solution!", "replies": [], "depth": 1}, {"id": "ib1gd54", "text": "Practice the golden rule\nNot to mention a property most of the time is easy to release if it\u2019s occupied.\nAs long as he will keep it nice and he pay the utility bill and will move in 30 days what the hell.\n\nCan I get it all depends on the market", "replies": [{"id": "ib1gflo", "text": "That\u2019s generally how I do things", "replies": [], "depth": 2}], "depth": 1}]