Tenants facing bankruptcy may present additional problems for property owners and property managers. When a tenant files for bankruptcy protection, the tenant’s debts and obligations become a matter of public record. The court (or designated trustee) will most likely terminate the tenant’s existing lease. Since many tenants want to stay, you will need to get a new lease approved and signed by the court/trustee.
Property owners and managers should have a clause in their lease to address tenants filing for bankruptcy. Owners and property managers should be notified if a tenant files for bankruptcy protection, but many times the tenants forget to notify the property manager or owner.
During the application process, property owners and managers should ask if prospective applicants have ever (or plans to) filed for bankruptcy protection.
Note: Owners and property managers should always consult a competent legal professional for their specific situation.