Bankrupt Tenants

We are seeing an increase in the number of tenants that are essentially nothing more than a squatter. They obtain possession of the premises and then pay very little or nothing. After the Landlord obtains an order of possession from the justice court they appeal and when the appeal is heard and they lose, they retain a bankruptcy lawyer to tie the property up even longer. It is an effective strategy, especially against the naive landlord.

Once the tenant has sought bankruptcy protection, the proper procedure is to file a Motion to Compel Debtor to Assume or Reject the Lease. Normally we do not file a lift stay motion. This might change if the debtor has had a plan confirmed. The motion would require the tenant to state whether he is going to assume the lease and to provide adequate assurance that he will pay on the lease and become current in the event he assumes the lease. If he responds that he is rejecting the lease, then we normally obtain an order from the court stating that the tenant is rejecting the lease and permitting the landlord to proceed with eviction proceedings. If the tenant/debtor fights this motion, more filings may be necessary.

The most important point for the Landlord is that bankruptcy really only changes the forum in which you are going to fight with your tenant for possession.  Tenants that were unable to make timely payment of rent before bankruptcy rarely do so after bankruptcy and we usually just continue to pressure the tenant to vacate in one form (or forum) or another.

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