Can I Collect Rent If I’m Surrendering Rental Property in Bankruptcy?
Rental properties can be a great source of income until a renter moves without notice or fails to pay or that rental income starts to be used for your personal household expenses. As situations arise, many people are finding it necessary to file bankruptcy and surrender the extra properties and the mortgages that come along with those properties. When you surrender a rental property in bankruptcy, you are in essence surrendering your interests and rights to the property. Therefore, you are not eligible to collect rent while in bankruptcy.
Additionally, the bankruptcy Trustee sees this as unprotected funds and will request the received funds to go to the creditors. Furthermore, tenants are always informed if a house is being surrendered in bankruptcy. Your tenants may be well aware of their rights and have the responsibility to report a debtor who tries to collect rental income while in bankruptcy.
Once you have been discharged of your debts and have received a final decree that officially closes your case, you may begin to receive rental income. However, approach this scenario with caution. Even though you have completed your bankruptcy the Trustee has the ability to reopen your case and require you to pay him all the funds you had received after your discharge. So, you definitely need to weigh your pros and cons. If this situation sits in your future horizon, you should discuss this with your bankruptcy attorney prior to your discharge. Moreover, if the tenants are aware of the circumstances, they may not even be willing to pay rent while still living in the home. Since the property is still in your name until the bank forecloses, you may engage in the eviction process. Or you could insist on the tenants paying enough to cover homeowners insurance or property taxes. If there is a homeowners’ association linked to the home, whoever lives in the property should stay current with the HOA.
We typically tell our clients to stop collecting rent when they decide to file for bankruptcy. Instead, the tenants should pay rent to the bankruptcy Trustee or stop paying rent all together if they no longer wish to stay in the house. This ensures the bankruptcy client is not doing anything to jeopardize the success of their bankruptcy.
Do Credit Repair Services (After Bankruptcy) Actually Work?
In this age of information it can be tough to discern which tasks we are capable of handling ourselves and which tasks we should leave to the professionals. As bankruptcy lawyers we have clients who contact us on a regular basis and ask if they should hire a credit repair company to rebuild their credit. In short, we don’t think so.
In the case of repairing your credit after bankruptcy, an individual is perfectly capable of resurrecting his or her own credit score. Research is all what it comes down to and having the time to fill out forms and make certain phone calls. Six months after filing, we suggest pulling your credit report from all three credit bureaus: Equifax, Experian and TransUnion (you can pull your credit report for free once a year by going here). You should examine these reports to make sure all debts listed in your petition have been discharged through your bankruptcy. If a credit or collection agency has failed to report correctly, it will be up to you to be your own advocate. First, you should send, in writing, a letter to the creditor stating when you filed bankruptcy, your case number, when you were discharged from all your debt and a request that they correct the entry with all three bureaus. Next, go to the individual credit bureaus websites and determine the process of filing a dispute against the creditor that is not reporting correctly. If the battle continues and you need a legal hand, you should contact your bankruptcy attorney: they should be able to fax over the necessary information to clear up any matter.
If a creditor still fails to accurately report the discharge of your debts to the credit bureaus then they could be sanctioned for violating federal laws. You could also report them to the Federal Trade Commission.
As in everything, it is important to document as you communicate with these companies. Although they are required to document as well, it is nice to have your own personal reference, especially if you are dealing with a difficult or large company. Make sure to stand your ground and know your rights!
How is the Household Size Determined for the Means Test?
The basic purpose of the Means Test is to determine whether a Debtor is eligible to file Chapter 7 bankruptcy. Along with other supporting requirements, the Means Test plays a major role in Chapter 7 bankruptcy. The Means Test also tells us whether a Debtor would need to pay back some of their debts in a Chapter 13 bankruptcy if they do not “pass.” Simply put, the Means Test determines the Debtor’s monthly income by taking the Debtor’s household’s gross income and subtracting qualified deductions. By doing this, we can decide whether the Debtor would need to be looking into filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Want To Know What It’s Like To Be Harassed By A Creditor? Real Phone Call
Many of those who are facing financially tough times right now are stressed out even more by creditors who call non-stop. Creditors push the boundaries on what they may and may not do to collect a debt.
For example, here is a voicemail a client of ours emailed us the other day. Our client allowed us to post this voicemail so others could see they are not alone with the constant and harassing phone calls.
After receiving the voicemail we called the number back and spoke with someone with the company. They explained they didn’t know our client had filed bankruptcy. However, we confirmed their mailing address was accurate and explained we had previously sent proper notice of the bankruptcy. We then let them know they were violating the Fair Debt Collection Practices Act and any further attempt to collect on this debt would be met with a motion for sanctions.
They told me they didn’t do anything illegal and, after explaining I had a recording of the voicemail, they hung up on us. Before doing so, they explained they would notate in their system that our client had filed bankruptcy and she would not be contacted again. To date, she hasn’t received another call.
Regardless, this phone call shows some creditors will do whatever it takes to collect on debts. If you believe a debt collector is overstepping the boundaries let them know that they are violating the Fair Debt Collection Practices Act. It is important to keep detailed notes about who you spoke with (including their identification information), what time they called and what they said. Without this information it is difficult to be successful in a motion for sanctions against the creditor.
Do I Have To List My Business Assets on My Personal Bankruptcy?
This is an excellent question. For the most part, our bankruptcy clients who have businesses fall into two categories. The first category consists of those who feel as though they and their business are “one” entity. The second category consists of those who feel as though their business is a completely separate entity. Often, when clients drop their paperwork off at our office and we question what business assets exist, clients will reply, “Well, that doesn’t belong to me, that belongs to my business.” So the real question is: what needs to be listed as assets in your bankruptcy and what does not?
Technically, ALL of your assets need to be listed. Therefore, going back to our previous blog post on whether or not tools are protected we can examine debtor-owned businesses based upon the same scenarios. Let’s use the example of Joe Blow’s Lawn Care. Joe owns Joe Blow’s Lawn Care. The lawn mower, rakes, blower, hedgers, etc. all belong to Joe. If he decided to no longer run the company next week, the only difference would be that the tools would move from his truck to his garage at home. These tools would need to be listed in Joe’s personal property and protected by the exemption known as “Tools of the Trade” as long as Joe is using them in his business. If Joe were to be sued, he would need to protect those tools as he would any other asset (such as a bank account or vehicle) he has from seizure.
Referring back to the same situation as discussed in the previous blog post, let’s use the scenario that Joe went to the Secretary of State and registered his company as a corporation. Now Joe Blow’s Lawn Care, Inc. is the owner of the tools. Even though the company at this point in time owns the tools, let us not forget that in the end scheme of things the debtor owns the company. That company is an asset in itself; therefore the tools would be listed on the business balance sheet, included as an asset and the Joe’s portion of equity from the corporation must be listed in the bankruptcy and protected.
Regardless of how large or small, the court looks as personal assets all in the same; they need to be listed and at least attempted to be protected in the bankruptcy. Again, it goes back to the confusing question of how the business should be treated for bankruptcy purposes. Since businesses can get quite complicated at times, we strongly suggest that you thoroughly discuss your business and any other assets you or your business may have with your attorney so they may advise you properly to ensure your assets are protected.
