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Ask Brent Blanchard Your Own Question
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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I have a rental tenant in a house I own and they have not paid

Customer Question

I have a rental tenant in a house I own and they have not paid the rent for five months. I have a judgement against them and currently am working on removing them from the property. I expect them to file bankruptcy anytime. I entend on filing to attach their assets, but, in York County, PA I must wait until January 16 to do so. That is 30 days from the judgement date.    Is there any way I can attach their assets and head off the bankruptcy filing. I am a nonsecured creditor? Sincerely, XXXXX XXXXX
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 7 years ago.
Yes, you are an unsecured creditor,Customer(I prefer to use customers' sign-in names, Mr. H.).

Even if you successfully get the assets attached, bankruptcy law could reverse that attachment if the debtor files less than 90 days after the attachment. The BK Trustee could try to "avoid" the involuntary payment as a "preferential transfer", take the assets or money back, and throw it into the pot to be share equally with all creditors--according to the pecking order of "priority". Short version: all secured creditors need to get paid in full, the unsecured priority claims like unpaid taxes are next, and unsecured creditors are last. Each class has to be paid in full before whatever's left gets divided by the next-lower class.

There is a possibility of there being some security for the judgment if it can be made into a lien on the debtor's property...usually that starts with real property, so a renter is unlikely to have that to serve as security--and that's only if there is any equity exceeding the loans on the property anyway.

There's no way that you can "head off" a bankruptcy filing. The Constitution in 1789 anticipated bankruptcy laws by giving Congress the authority to set up those courts. Anyone who is "debtor" under the BK Code has a right to declare BK, so long as it is done within the guidelines of the law.

Thank you.

BB.
Brent Blanchard and other Bankruptcy Law Specialists are ready to help you
Customer: replied 7 years ago.
What is a bankrupt party allowed to keep ie, auto, cloths, et? The tenent appears to have purchased a third vehicle which he is not using. Can he protect or hide assets in such?
Expert:  Brent Blanchard replied 7 years ago.
Depends on the state, and I do not recall immediately the details of PA's "excemption scheme". In short, federal law lets state legislatures choose to either use the (not very generous) federal exemptions, or "opt out" by setting their own state's (usually more generous) exemption values.

It also depends on whether the asset is owned outright or if there is still an outstanding loan secured by that asset. Being underwater in a car is not an asset because more is owed on it than it is worth. The debtor can re-affirm on the debt and keep the asset. Such an asset is also of no use to a judgment creditor because siezing it and auctioning it off won't bring enough money to pay off the lender (who gets FIRST dibs on the sale proceeds).

For BK, the only personal items and clothing that might NOT be exempt would be furs and non-marriage ring, non-family heirloom jewelry (there's a value limit for the heirlooms, too). One car is always exempt, usually up to a certain unencumbered value, and special rules apply to vehicles modified to be usuable by a disabled person.

IRA and other retirement accounts are exempt, again usually up to a certain value. Regular bank accounts are exempt up to a fairly low value, but people who go BK almost never have much money in the bank anyway.

Past-due rents also don't fall into the small subset of debts that are not dischargeable in BK. They are not like drunk driving liabilities or unpaid child support or student loans or punitive damages awards (usually), which don't get wiped out by BK.

It all goes by the "unencumbered" or "net" or "equity" value of the asset.