By Ryan C. Wood
YES, YES and YES. The reality is an apartment building owner or manager should rent to those who have filed for bankruptcy protection because it is in their best financial interest. Let me tell you why it makes financial sense given just not discriminating against other humans on THIS basis may not be enough motivation. You are in the business of renting rentals and getting paid each month so why not rent to whomever is most likely to do that. Will a mindless, soulless and heartless corporation rent to someone that filed for bankruptcy protection? I have found there are more problems with large corporate ran apartment complexes given the humans that work there are “just doing their job.” Which means they “just follow” the corporations rules and procedures to ensure they remain employed regardless of what reality actually is or harm caused. And yes, still do your due diligence and request pay statements to make sure they can afford the rent though with first, last month’s rent and security deposit.
Link to YouTube video below:
What Is The Reality?
The reality is an apartment building owner or manager should rent to those who have filed for bankruptcy protection because it is in their best financial interest. For one, the potential renter has no debt (or very little). Two, the renter with a bankruptcy wants to rebuild their credit. Three, they are not eligible to obtain a discharge for many years depending upon the chapter of bankruptcy they filed and when. Four, it is not legal to discriminate against bankruptcy filers . . . . this is a stretch though in reality. If you are an owner or manager of an apartment building and want to decrease your accounts receivable and delinquent rent payments please rent to those who have no debts . . . make sense right? Of course as a bankruptcy attorney I am biased right? Or is this drum I keep beating just true and make sense? If someone is just following the law they should not be looked upon as bad or discriminated against right? We can all agree that all types of discrimination are bad right?
One: Bankruptcy Filers Have No Debts
Okay, so this is a little more complicated but is true in some circumstances. If the bankruptcy filer has a vehicle loan, student loans or owed not dischargeable taxes they may still have some debts after a discharge in bankruptcy. In a Chapter 7 bankruptcy they will not have any general unsecured debts like credit cards though after discharge. For examples:
1. Prospective Renter 1: $70,000 gross income with $40,000 in credit card debt and no bankruptcy on credit report.
2. Prospective Renter 2: $70,000 gross income no creditor debt and a bankruptcy on credit report.
Oh by the way, they both work for the same company and have the same experience etcetera. This is a simplistic example but exactly what I am trying to point out. Which prospective renter is a higher risk of not paying the rent or legally forcing you to hold to bag if rent payments are missed?
So are you going to go with the person that is struggling to pay credit card debts that have high interest rates that were once illegal and they are getting squeezed harder and harder each month to pay basic living expenses? Or rent to the person that followed the law and discharged debts to make sure they can pay their rent each month and eat?
Or are you going to illegally discriminate against my clients for following the law and obtaining a discharge according to the law written by your elected Congress and signed into law by your elected President of the United States of America? I hope you choose to not discriminate.
Two: My Clients Want To Rebuild Their Credit
No one wants to file bankruptcy and I can assure you after receiving a discharge my clients want to rebuild their credit. As a bankruptcy attorney I feel I have an obligation to provide education too. We have a number of Consumer Financial Protection Bureau free pamphlets (yes they are free; all you have to do is request them; another reason to choose our services) on a table in the front of our office include: Know Your Rights When A Debt Collector Calls; How To Spot Frauds and Scams; How To Find The Best Credit Card; and How To Rebuild Your Credit. My clients have been put through hell already with missed payments, harassing phone calls and the stress of paying the bills each month. They do not want go through it again and they want to rebuild their credit. As an apartment owner or manager you can encourage my past client to enroll in a bill paying service that reports to all three credit bureaus so that paying rent also helps rebuild credit. How about no discrimination but incentification of on-time regular rent payments that is mutually beneficial? You do want on-time regular payments of rent each and every month right? You should consider it.
Three: We Can Only Get A Chapter 7 Discharge After 8 Years From Last Chapter 7 Case Filed
Once someone files for chapter 7 bankruptcy and discharges all of their eligible unsecured debt they cannot obtain a chapter 7 discharge again for eight years. So what happens if they do not pay their rent? Well, the apartment manager/owner has every legal option available to enforce the debt. You do not have to worry about the renter filing for bankruptcy protection the day before you are supposed to evict them or discharge the unpaid rent. So why not rent to someone with a bankruptcy on their credit report?
Four: It Is Against The Law To Discriminate Against A Bankruptcy Filer
Section 525 of the Bankruptcy Code provides some specific protections. You cannot be terminated or discriminated against by a private employer. You also cannot be denied student loans. This is a very simplistic explanation of Section 525, but it exists. What about not renting to someone because there is a bankruptcy on their credit report? This kind of discrimination falls under an apartment owner/manager not renting to someone with three noisy kids or two dogs. You cannot not rent to someone because of their kids, but some other “pretext” or excuse, if any, will be given for the discrimination other than the actual horrible discriminating reason.
So rent to someone with a bankruptcy on their credit report and give them a chance just like some other human I am sure gave you a chance at some point in your life. Pay it forward. I really have no realistic hope that mindless, heartless soulless corporations will change any of their policies in this area………