rental property income

[troublmaker_98]

i have a rental property that will be given back in my ch 7 bk. all payments have been on time until april. the current tenants are now facing financial troubles of their own. the rent is $1100 per month, which covers my mortgage and escrows (i make less then $50 per month income from the property). last month they paid only $500, which would not pay the mortgage. now for may they have deposited only $400. still not enough to pay april's mortgage. however i have at least paid the homeowners insurance.

i have "dipped" into the money to help cover my personal expenses (not related to the property). we signed a 1yr lease that will expire in october 07. i'm not interested in fighting them for the money since i plan to include the property in the ch 7.

my concern is:
1. will the trustee require that i enforce the contract and go after monies due (both arrears and future)? my attorney suggested that when the property is included in the bk, it will no longer be "my problem". i would to hear some real life experiences if anyone has been thru this.

2. and what about the money i "dipped" into? am i causing issues for myself? it was $200 that i took for clothes/shoes. and the account balance is/was note enough to pay the mortgage. if required i could find a way to get it back in the account. any advice/comments?

3. and what will i be responsible for to the tenants, if anything, since i will be giving up the property before the 1yr contract expiration? they are good people, doing the best they can. i plan to tell them about the BK after my 341 (june 20th), in case something doesn't work out. i would like to be as cordial as possible with them under these circumstances.

thank you!
TM

[Minnymouth]

Once you file bankruptcy and include the rental property to be discharged, then the Trustee takes control of the debts regarding the property. If money is owed the Trustee will collect it from the tenants....... and the bank that is holding the note will foreclose on you note with them (or if you are surrendering the property) they will take back over the property after discharge. Then the issue of money owed as rent becomes someone else's problem.....

As for the money you have "dipped" into....... yes, it will need to be replaced as the Trustee will want to know what happened to it.... and a clothes/shoes buying spree isn't exactly what the Trustee will "go for"...............

After you file, you need to contact your tennants and let them know that you have filed, and will no longer be their landlord..... thus they will have to make arrangements to keep their payments current to stay where they are....

If they have been good tenants you sure don't want their lives turned upside down also (get an eviction notice) because you filed bankruptcy...... Let them know who to contact regarding thier rental payments.....

Keep us posted...

[SamanthaJones]

Is rental income your property?

It IS unless your note contains an 'assignment of rents', meaning that the note indicates that the rental income you collect is the property of the lender. In some notes, that exists but only if and when the borrower becomes in default of the loan. Read your loan papers. Probably, the rental income belongs to you, and has no connection to your liability to pay the mortgage. Meaning? You can take the rent and not pay the mortgage until the place forecloses.

[JRScott]

If they are in as bad a shape as you say, then giving them the most notice is probably best. I 'm not sure I'd wait til the 341. I'd give them perhaps 30 days notice prior to the 341 that you have filed for bankruptcy. Let them know what the situation is and that you'll be surrendering the property as a result of the bankruptcy. After all they'll most likely have to find a new place to live and also the Trustee is likely to go after the money they owe on the rent.