Renting out property while in bankruptcy/foreclosure.

[justdidit]

The mortgage is about a year and a half behind and I'm waiting for discharge for my bankruptcy that should come around mid November. I have gotten a letter from the bank's lawyer regarding the rent regarding potential move toward foreclosure due to none payment.

My ex and myself are on the deed. She has also recently file for bankruptcy as well and lives hours away.

Can I rent this property out? Any liability/legal consequences as the property is moving toward foreclosure? Am I just making more headache for myself?

[DaddyDavid]

Read the note- it may say that rents are property of the lender.

If not, since you own it you can rent it, but you should tell the tenants the situation and only rent it month to month to prevent them from also being encumbered with a foreclosure. You may find tenants that have been in your same shoes?

[HHM]

More headache, yes. But as was previously pointed out, you want to look for an "assignment of rents" clause in your mortgage. But as far as the BK or mortgage lender are concerned, not a big problem.

The headache would come from the hassle of finding tenants. Is the house in rentable condition? The catch 22 of your situation, if you are upfront about the situation (which you SHOULD be), the tenants can take advantage. After all, are you going to go to the trouble to evict them? If you don't tell them, you can have just as many problem when the foreclosure comes to light. And since your BK is already filed, the tenants are free to go after you for damages. In the end, you are probably asking for more headache and hassle than it is worth.

[justdidit]

Thanks for your responses. In the back of my mind there is a notion that this would be a hassle in the end. I was hoping more than anything to cover the HOA fees so the rent would be low compared to the general area.

The property is in rent-able condition (3 years old and very clean). They know that the property is for a month to month basis and that they may have to leave the property ASAP when notified to, but do not know that the reason for this is foreclosure. Its an option, I think I'm gonna let it pass with a clear mind of not having issues in the end.

It really seems like its too much of a headache. I could just pay the HOA and wait for the property to foreclose or move in and pay a couple hundred extra for the utilities.

[SPalin]

If you have renter's in the house and the house sells back to the bank or new owner after the Sheriff/Trustee sale the renter can negotiate with the bank for Cash of Keys, as long as they have taken care of it... in the mean time you can pocket the rent money until it sales and changes ownership.