Rental income questions

[StrawberrySu]

If you need your rental incomes to live on, will the trustee still take them at your bankruptcy? If our Schedule I includes military retirement income and rental income of a total of $3000, and Schedule J has expenses of $3000, will we be able to still use our rental income?

If husband gets a job when we get to out new city, or he is drawing unemployment, the rental income takes us over the median. Would we be able to just have our renters stop paying 6 months out, but continue to live in and maintain the properties, so the rental income isn't a factor?

If we are paying insurance and any other fees for our home we have left, can we included these on our expenses, even though we aren't living there anymore? Thanks so much!

[tcreegan]

Hi StrawberrySu,

Definitely want to keep the rental income off Schedule I The rental income isn't going to continue post-BK right? Schedule I is "forward looking" so if you aren't keeping the rental after the BK, don't put the income on Schedule I

They might vary some, but anywhere you go there are going to be housing expenses. Just don't "double-dip" ...if the rentals are still renting, those expenses get deducted from the rental income directly. Wherever you are calling home, those expenses go with all your other expenses.

Sounds like you are making progress...?

Tom in Colo

[debee]

If you need your rental incomes to live on, will the trustee still take them at your bankruptcy?

Are you asking if the trustee will collect the rent, or if he will sell the rental property?

If you have equity in the rental property that cannot be exempted, the trustee will want to sell the property and distribute the proceeds to your creditors. If you are cash-flow negative on the rental, you won't be allowed to claim any net monthly operating loss on your schedules. The best chance for keeping the rental would be if it is cash flow positive with no equity.

If husband gets a job when we get to out new city, or he is drawing unemployment, the rental income takes us over the median. Would we be able to just have our renters stop paying 6 months out, but continue to live in and maintain the properties, so the rental income isn't a factor?

You would only count the income (on the means test) that is over and above the expenses for operating the rental - taxes, insurance, utilities, mortgage, maintenance, etc. You wouldn't just add the annual rental income to your salary/wage income...

(You can only claim the expenses for one principal residence, so no utilities for a house you leave behind and surrender in bk. But yes to utilities where you actually live...)

[frogger]

If you need your rental incomes to live on, will the trustee still take them at your bankruptcy? If our Schedule I includes military retirement income and rental income of a total of $3000, and Schedule J has expenses of $3000, will we be able to still use our rental income?

Not to be the party crasher here, but it's not the trustees job to make sure you have enough income to live on. The job of the trustee is to get as much $$$ as possible for your creditors. It's your job to find more income. Good luck.

[StrawberrySu]

Hi StrawberrySu,

Definitely want to keep the rental income off Schedule I The rental income isn't going to continue post-BK right? Schedule I is "forward looking" so if you aren't keeping the rental after the BK, don't put the income on Schedule I

They might vary some, but anywhere you go there are going to be housing expenses. Just don't "double-dip" ...if the rentals are still renting, those expenses get deducted from the rental income directly. Wherever you are calling home, those expenses go with all your other expenses.

Sounds like you are making progress...?

Tom in Colo

Tom, the plan is to surrender the rental homes and our primary home all in the foreclosure. They are all underwater 40 - 50k, rent I can get is hundreds short of mortgages. BUT, so many are saying on this board that it takes so long to foreclose, we thought after the bk we could get rent on them again until they are finally foreclosed on. Thanks for letting me know about double dipping, that was what I wanted to know. Our plan was to basically have people "house sitting" the rentals while we are going thru BK.

[StrawberrySu]

Are you asking if the trustee will collect the rent, or if he will sell the rental property?

If you have equity in the rental property that cannot be exempted, the trustee will want to sell the property and distribute the proceeds to your creditors. If you are cash-flow negative on the rental, you won't be allowed to claim any net monthly operating loss on your schedules. The best chance for keeping the rental would be if it is cash flow positive with no equity.




You would only count the income (on the means test) that is over and above the expenses for operating the rental - taxes, insurance, utilities, mortgage, maintenance, etc. You wouldn't just add the annual rental income to your salary/wage income...

(You can only claim the expenses for one principal residence, so no utilities for a house you leave behind and surrender in bk. But yes to utilities where you actually live...)

There is only income now because we aren't paying the mortgage, tenant pays utilities and taxes and insurance are in mort pymt. What do you think about "house sitters"?.

One tenant was planning our buying the house, he had lease optioned it in July of 09. He has paid $10k in lease option & monthly credit. He has been a super tenant, and we thought we could offer him several months free rent to recoup his lease option money, and we would feel better about that. Just don't know how the BK court would look at our doing that.

Second rental has a single mom with three little kids who works as a waitress, I would love to be able to let her stay in house and look after it instead of leaving it empty.

Third house is ours, we would find a house sitter to stay here when we leave. We have great neighbors, and don't want the house to get vandalized.

[debee]

I don't think the bk court will care if your tenants stop paying rent prior to or at the point of your filing. You can't control them and if they stop paying, they stop paying. That's how I would think of it and go about it. If it were me, I would just let the tenants that you won't mind if they stop paying.

As you probably already know, if you have been collecting rent but not paying the mortgages in the 6 month lookback, that rent does count as income. You'll want to be sure and crunch your numbers to make sure that won't be a problem for you.

[StrawberrySu]

I don't think the bk court will care if your tenants stop paying rent prior to or at the point of your filing. You can't control them and if they stop paying, they stop paying. That's how I would think of it and go about it. If it were me, I would just let the tenants that you won't mind if they stop paying.

As you probably already know, if you have been collecting rent but not paying the mortgages in the 6 month lookback, that rent does count as income. You'll want to be sure and crunch your numbers to make sure that won't be a problem for you.

debee, I planned on going Non-consumer Chapter 7, so with means test not applying, what we make in the 6 months prior shouldn't matter, should it? just our schedule I & J? Thanks

[debee]

If you can file a non-consumer (you lucky dog) then yeah, means test not an issue. Our rentals were purchased as principal residences (rather than investments) and were converted into rentals after the fact, so we did not qualify to file a non-consumer.

Sounds like you must have bought yours as investment properties all along. That being the case, you might have some kind of "assignment of rents" clause in your loan docs. You might want to look into that.