If my tenant declares bankruptcy, is she allowed to stay in my rental property rent-free?

I guess depends on what state, Indiana the tenant would/can stay but would have to re do the lease and may be clear of any past payments. I think she would have to stay current on future payments too. I'd say call your attorney to get the facts.

good luck

That is a good questions, and now you have me checking my area. I am sure if they are behind in rent they can put you in the chapter 7 and NOT pay, but you can also give them a 3 day notice to evict for non payment of rent.

No your tenant is not allowed to stay rent free. You will likely be out any back rent owed. Rental laws vary by state and locale. Call your attorney and have him or her start the eviction process or if you are sure the bk will solve this tenants problem then negotiate a new lease with a new security deposit and first and last months rent. Look at it this way the tenant will be able to pay his or her rent now that their debts have been discharged.

Good point, Paul, about the tenant being able to pay the rent after the bankruptcy. NOT being able to pay her rent may have had a huge impact on her thinking about bankruptcy.

Some of these folks did not intend to end up in such a mess. If the circumstances point to the tenant wanting to start a new life and slowly begin to rebuild her credit, then maybe it will help both parties if she stays where she is. The tenant will not have to pay a moving company, take time away from her job to look for another apartment (which will be very difficult in her current situation), and can just finally relax and take a deep breath before starting the next phase of her life (with her new lease). Hopefully, she will see this as an opportunity to have a brighter future and make better financial decisions.

Jennifer, the plus for you would be that the apartment would not have to set vacant while it was made ready, you probably would not have to paint the apartment and shampoo the carpet, no time would be spent marketing the apartment, and it would be one less vacancy on the books.

Keep in mind this is an uncharted area for me, so it's easy for me to paint a rosy picture of how it should turn out. Good luck. By now, I'm sure something has happened.

To update the story - the renters managed to pay their rent until January at which point they threw up their hands and begged for mercy. They're moving out next week and say they intend to pay me what they owe. Nicest people in the world, no hard feelings, and they say they'll leave the house nicer than they found it. I'll know more... gosh... not next week, this week!

Thanks for all your responses.

Wow, that is great. You earned their respect along the way, so it sounds like they will try and do the right thing, if possible. Good for you.

Good,

The issue of tenants not paying should be taken care of in two ways:
a - securities for long enough to allow you keep the same cashflow for the period.
b - their respect and the relation with them. This is sometimes overlooked, but giving them a good service is part of risk management.

Steve

Steve