If you are a landlord and your tenants have been affected by COVID-19 and are unable to pay, you may have issues servicing your debts, including mortgages or deeds of trust on real estate you own. If that’s the case, you may need a Chapter 11 bankruptcy to try to reorganize your debts. A Subchapter V filing, a new form of Chapter 11, can streamline bankruptcy, making it quicker to confirm plans and less expensive overall. You could also investigate a Chapter 7 bankruptcy if you intend to liquidate and walk away from your real estate, or a Chapter 13 bankruptcy if your debt is relatively low as a landlord and you are able to make monthly payments to your creditors.
If you have been affected by COVID-19 and can’t pay on your rent, you may be protected by eviction moratoriums. However, that isn’t set to last and nothing blocking evictions will forgive the unpaid rents. You should consult with a bankruptcy attorney, and rather soon, because we project bankruptcy filings – and therefore consultations – to increase very quickly despite the expected stimulus payments. A Chapter 7 can discharge past due rents and other unsecured debts, while a Chapter 13 can allow for repayment of debts over time.
Some of our clients and potential clients have received offers for forbearances from their mortgage servicers. A forbearance temporarily suspends mortgage payments due. That sounds great….until you receive a bill months later for 3 or 4 payments due at a time. If you don’t have the money to pay all those payments upfront, you’re suddenly very close to a default and foreclosure could be next. For this reason, we are almost certain to see an explosion of Chapter 13 filings to prevent a wave of foreclosure filings in state courts (in Kansas) and through the self-help processes in Missouri.
If you have been affected at all by COVID-19 or other financial strain, please make a plan to contact us soon to discuss what options you might have available. No matter what further legal protections our states and federal governments might offer, 2021 will likely start out with a wave of lawsuits that could trigger the largest amount of bankruptcy filings in the past decade. Have a plan, and make sure that plan involves a call to a bankruptcy attorney who can explain your options and help you make a plan. At WM Law we are….here to help.