How to Handle Tenant Bankruptcy in Phoenix

What to Do if Your Phoenix Tenants Filed for Bankruptcy

tenants-in-phoenix-filing-bankruptcy

Whether it’s the result of job loss or financial irresponsibility, tenant bankruptcy can pose problems with Phoenix landlords. It can quickly slam on the breaks of your rental income, leaving you wondering where to turn next.

If you have a tenant who filed bankruptcy or is in the process, there are several considerations to keep in mind. This guide will help you determine how to handle tenant bankruptcy in Phoenix.

 

Defining Bankruptcy

Bankruptcy is a legal proceeding that allows people to eliminated unsecured debt, such as credit cards. This process also stops foreclosure, repossession, wage garnishments, and attempts to collect the unsecured debt.

Guess what else? Depending on what part of the process the tenant is at in bankruptcy, a landlord can’t immediately try to collect debts. In fact, you can face a fine for doing so.

Before you panic, know that the actions to deal with Phoenix tenant bankruptcy depends on several factors. First, let’s discuss the chapters of Bankruptcy.

 

Chapter 13 Bankruptcy

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Chapter 13 is also known as a wage earner’s plan. This type of bankruptcy can help wage earners pay off debt under a secured payment plan. They make payments in installments over a period of 3-5 years, while federal law forbids creditors from collection efforts. People who run into issues such as job loss typically file Chapter 13.

 

Chapter 7 Bankruptcy

This version of bankruptcy eliminates unsecured debt such as credit cards and medical bills. There is no repayment plan for Chapter 7, and Phoenix tenants walk away without any debt. Chapter 7 is the most common type of bankruptcy.

No matter which chapter of tenant bankruptcy you are dealing with, there is an automatic stay appointed by the court.

 

What is an Automatic Stay?

An automatic stay is a statutory injunction that prohibits landlords from trying to obtain possession or control of a tenant’s property.

After the tenant receives an automatic stay, a landlord cannot take action.

However, this doesn’t mean that you lose all your income.

A tenant can make a choice to leave your property once they filed for bankruptcy. This means that you can list your rental properties in Phoenix and carry on with business as usual.

The second option is for the tenant to continue paying rent despite that they are going through bankruptcy.

The third option is that they will owe post-petition rent plus fees or face eviction.

 

Do Tenants Have to Pay Rent During Bankruptcy?

rent-payment-due

If the tenant remains living in your rental property, they must pay post-petition rent—although this can take some time to collect.

For example, if a tenant files bankruptcy before the next lease due date, they are only required to pay the next rent payment plus the associated fees.

Furthermore, lease payments the tenant did not pay before filing bankruptcy is still owed. This is known as a pre-petition claim.

The timing of the bankruptcy filing can play a big role in when and how you will receive rent payment.

If the tenant does not pay the amount due, the landlord is able to request a lift of the automatic stay. This allows the motion of eviction to move forward.

 

Evicting a Phoenix Tenant Filing Bankruptcy

The process to evict a tenant in Phoenix over non-payment and bankruptcy is by way of rejecting the lease. This is the legal term for the tenant breaching the lease, requiring them to turn over your property and vacating the premises.

This can happen if you request to lift the automatic stay, where the judge allows the eviction process to proceed. However, you can only evict if the automatic stay is lifted and you’re unable to take action otherwise.

Keep in mind that if the tenant does other actions to void the lease, such as illegal drug use, the bankruptcy filing won’t do anything to delay or stop the eviction process.

When a Phoenix tenant files for bankruptcy, you are not out of options or out of income. While there might be some waiting involved, you will receive your funds whether the tenant pays as usual or its post-petition.

If the tenant is successfully evicted, the same laws apply as any other tenant. The tenant must be moved out from the property on the specified date, or other legal or financial consequences can happen to the tenant.

 

Immediate Action to Take for Phoenix Tenant Bankruptcy

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While you can’t prevent a phoenix tenant from filing for bankruptcy, there are other ways to take action and lessen the blow of the process.

  1. Prepare for eviction early: If you have signs that a tenant might file for bankruptcy, such as habitually late payments or verbal hints, start the process now. If the eviction is already in motion before the tenant files, it can be easier to evict.
  2. Work with the tenant’s bankruptcy trustee: Their trustee calls the shots on who gets paid. Keep the door of conversation open so you can find out new information about rent payment.
  3. Know your rights and the laws: Even though a tenant files for bankruptcy, this doesn’t mean you are out of money or out of luck. Working with an experienced property management company in Phoenix can help guide you through this process.

 

Being prepared for the possibility of Phoenix tenant bankruptcy is an advantage. However, an even better advantage is avoiding situations like this if at all possible.

These are a few guidelines on how you can possibly prevent the circumstances of tenant bankruptcy.

 

Be Selective with Tenants to Help Prevent Bankruptcy Issues

It’s important to know who you are renting to and their credit and past rental history. Look for the following when screening a new Phoenix tenant:

  • Run credit reports for tenants: Most landlords look for credit scores between 600-650 when it comes to renting units.
  • Require first and last month’s rent to move in: This will keep you covered for at least two months while the tenant is working through their bankruptcy filing.
  • Obtain credit enhancements: This is a way to help you collect rent if the tenant is going through bankruptcy. In addition to security deposits, you can also tap into letters of credit and lease bonds. A good credit enhancement entails the likelihood of being enforced due to bankruptcy.

 

Get Help Managing Your Phoenix Rental Property

Property management is full of twists and turns, including when tenants file for bankruptcy. Real Property Management Phoenix Valley is your source for experienced property managers, tending to issues including bankruptcy and eviction. We invite you to contact us about our property management services and get a free quote.

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Top 3 Aspects of Rent Collections, Phoenix Rental Property



When you own rental property, your goal comes down to the amount of rent you collect. It would be nice if you were always paid the rent on time and the check cleared without problems. However, that rarely occurs 100% of the time. Even with careful tenant screening, your tenants can run into unexpected financial situations and your payments are no longer coming in on time or regularly. Your rent collection process should help your cash flow be as regular as possible.
1. Set the Rent Expectations Early
Real Property Management WV Phoenix has been successful in encouraging successful rent collecting when the process starts with the careful screening of your potential tenants.  When you have a vacancy, it is a temptation to rent your home as quickly as possible and not be as careful as you should be with your tenant choices. We are patient and make sure your potential tenant has a high enough credit score and is able to prove an income sufficient enough to be able to pay the rent regularly as well as has sound rental references. An applicant should earn at least three times the amount of the rent for your unit. Then at the lease signing, we let your tenants know Real Property Management WV Phx expectations and policies with regard to rent collection. Good communication from the start makes us strict, but fair, and policies are understood from the beginning of their residency.
2. Technology Payment Process
A rent collecting process that is technologically based is a secure and convenient way for your tenants to pay their rent. Real Property Management WV Phx has an online collection option which lessens any rent collection delays. When the rent is collected, this automated system also works for the property owner giving a direct deposit from the collected rent to the owner. Keeping the rent collection process professional and not personal, with understood expectations, gives us the tools for a more successful renting experience.
3. Automated Collections Process
An aspect of rental property management in Phoenix, AZ that is never pleasant is the business of collections when a tenant doesn’t pay the rent. Even the best screened tenants can have a difficult time in their personal lives that affects their abilities to pay rent on time. With an automatic collection process, the moment rent is not collected; automated notices can be sent to the tenant. These notices can be scheduled easily and speak to your tenants with respect. As soon as the law permits, an eviction process can be started with a non-paying tenant so your days without rent can be as few as possible.
Clear rent policies along with a secure technology platform through Real Property Management WV Phx will help your Phoenixrental property rent collecting run smoothly.
RPMWV Phx offers full service Phoenix Real Estate & Phoenix Property Management services.  For additional information you can contact us at info@rpmwvphx.com or 602-281-2884

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Rent Cycle for Real Property Management West Valley Phoenix

Real Property Management WV Phoenix is the Phoenixproperty management company that knows the leasing cycle from rent-ready to lease renewal. An important first step in that cycle is having your property rent-ready. Understanding what it means to have your property ready to show and move in can significantly reduce the number of vacancy days your property has. Real Property Management WV Phoenix takes the steps to prepare a rental property before it is ever shown to prospective tenants or even advertised will have greater rental success.
When a unit is vacant, we immediately suggest that you have the property re-keyed. This is often a legal requirement in many places because it keeps your future tenants safe from theft and burglaries. You have no idea who could have the key that your old tenants had. The safety of your tenants should always be a priority and should be taken care of long before someone moves into your rental. Changing the locks is a important safety precaution for you and your prospective tenants, even when the property is empty. Install a lock box that holds the key for the convenience of future showings with leasing agents.
Now is also a great time to take care of any repairs and/or remodels you have to do to the property. This includes any outdoor or indoor work, and anything that might have been destroyed by the previous tenants. However, make sure that all cleanup is done before showing a home. Keep the utilities on so that prospective tenants can really see what the property looks like in any weather and at any time of day. Always remember safety and take care of any broken windows, mold, broken locks, and exposed wires.
Before you set that rent rate, Real Property Management WV Phoenix can complete a rent market analysis to determine the best rental rate for your specific location and unit. When your home is professionally cleaned and all appliances checked and in working order, you are getting closer to being rent-ready.
Finally, take a good look at your property from the curb. Does it have that curbside appeal that will give the positive first impression you want. Just a little initial effort will make a big difference towards your leasing your property quickly and ensuring your investment is giving you a return.

Follow @rpmwvphoenix

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The Final Chapter of the Rental Cycle

This will be the final post in our tenant rental cycle series. The first post was on October 20, 2014 and gave you an overview of the process. The next 12 (including this one) give details on each significant step along the way. If you can implement the ideas presented in this series, you will be on your way to becoming a successful property manager.


The last thing that needs to be done occurs after the tenant moves out. You will need to compare the tenant move-in inspection with the tenant move-out inspection and determine what to do with the refundable part of the security deposit.

You need to determine what work needs to be done and who is responsible. If your move-in/move-out inspections are good, this step will be easier. 

Keep in mind, the two most common issues that need to be addressed involve the walls and the floors. With the walls, a room at the average rental property should last up to three years with a good coat of semi-gloss pant.  With carpet, a good rule of thumb is that carpet should last 5 years at a rental property.

After you determine what work needs to be done and who is responsible, you need to figure out how much this work will cost. Then, you will need to send out a disposition of deposit to the tenants within 14 business days (in Arizona). 

This disposition document will explain how much the tenant will get back from the deposit and how much you will be applying to work needed to repair damage and get the property rent ready that you determined was tenant responsibility.

Make sure you get receipts from all contractors that do the turnover work at your property. If you have these and good inspections, you will be prepared should the tenant dispute their disposition assessments and decide to challenge you in court.
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