What can I do if my tenant files for bankruptcy?

If you own commercial real estate, your income will depend on the financial well-being of your tenants. Therefore, if your tenant files for bankruptcy, you'll be in a situation that may bring uncertainty and worry.

It's likely that you'll first learn about this when you receive a notice from the bankruptcy courts. However, you may have seen the warning signs, especially if they have been struggling to keep up with rental payments for the last few months. The following is an overview of what you can do if your tenant files for bankruptcy.

Consider the possibility of losing missed rental payments

If your tenant files for Chapter 7 bankruptcy, it's a distinct possibility that you will not be able to gain back missed rental payments. Other bankruptcy chapters may lead you to be paid back at a later date.

Consider asking the bankruptcy court to ignore the automatic stay

The automatic stay put in place will mean that you cannot take action to actively seek owed payments. However, you can ask the courts to revoke the automatic stay. This may help you to succeed in the eviction process.

Deduct losses on your taxes

If you lose money due to legal expenses and missed rent, you will be able to deduct these losses on your taxes, which should help you prevent significant financial hardship.

If your tenant has recently filed for bankruptcy, this could affect you financially for months or years to come. This is why it is important that you understand how you can most effectively take control of the situation and protect your business.