Bankruptcy Filings in a Tenant Background Check?

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Bankruptcy Filings Found in a Tenant Background Check

Very frequently when we are conducting a tenant background check, we discover that the applicant has filed for bankruptcy at some point in the past.  A bankruptcy filing is not necessarily a negative from the prospective of checking a potential tenant’s background history.  For example, we see many examples of applicants who have filed for bankruptcy and have received a discharge, but yet have no judgments or evictions in their past.

Honest Bankruptcy Debtors without Fraudulent Intent Deserve a Fresh StartBankruptcy Filings

It is not always fair to assume that just because there was bankruptcy found in the past that this is a high risk applicant.  There are a number of positive attributes that may follow the a bankruptcy debtor who has been successful in obtaining a discharge of all of their debts as in a Chapter 7 filing.   Many times the debtor who has gone through bankruptcy will be extremely concerned about rebuilding their credit and establishing a very “clean record” to show any potential future creditors that they are not a high risk candidate.  In doing so, many of these kind of tenants will be exceptional candidates for paying their rent on time and being exceptionally reliable at meeting their financial responsibilities.   For this reason, there are a number of seasoned landlords who have learned to recognize certain types of applicants with a bankruptcy in their past as potentially a desirable tenant.

Beware of Applicants Who Have Had Their Bankruptcy Case Dismissed

If your applicant was unsuccessful at obtaining a discharge of debt and bankruptcy and it was dismissed, be careful!  In our reports, we identify the status of the bankruptcy and if you see that your applicant attempted bankruptcy but failed, you can be assured that the debtor’s debts were not discharged and this can be a very serious concern moving forward.

Rental Applicants who are Still in a Chapter 13 Bankruptcy

There is a major difference between a Chapter 7 discharge and a Chapter 13 or Chapter 11 Bankruptcy which is a reorganization of debt.  Typically a reorganization plan will occur over the course of a number of years.   For unsecured creditors, the debtor typically pays unsecured creditors pennies on the dollar.  On the other hand, secured creditors often are in line to receive 100% of their debt and can include interest.   If you have a rental applicant that is presently still in a reorganization bankruptcy, we highly recommend that you carefully scrutinize the bankruptcy petition and examine the payment plan, if it has been approved by the bankruptcy court.   If you have ordered one of our reports and your applicant is presently in a reorganization bankruptcy plan, we will be happy to provide you with a complimentary copy of your debtor’s bankruptcy petition.   This can also be viewed online or by visiting the local district bankruptcy court where your applicant filed.

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