Legal Question in Real Estate Law in California
The owner of my apartment filed for Chapter 7 Bankruptcy and the property is currently being managed by a court appointed Trustee. The previous manager still lists vacant units on various websites for rent and tells the tenants that the owner will get the property back. Therefore, he insists that the tenants keep sending rent checks to the previous owner. All tenants refused of course. What is the likelihood of previous owner getting the property back? Thank you.
2 Answers from Attorneys
In a Chapter 7, the chances are pretty slim, especially when the case has progressed for a while without dismissal. The basic premise of a Chapter 7 is that the debtor's assets will be liquidated. Some bankruptcies are strategically filed to accomplish particular debtor goals, then allowed to be dismissed for failure to file this-or-that when the particular creditor threat seems to be past.
I agree with Mr. Whipple regarding the chances of getting the property back. Furthermore, whether the owner gets it back or not, the rents are not his while he is in Chapter 7. If he was a debtor in possession under one of the debt reorganization bankruptcy chapters, that might be another matter, but not in Chapter 7. That does NOT however mean you and the other tenants won some kind of lottery and get to live rent free. The rents belong to the Trustee, and you should be paying them to the trustee, or banking them in some kind of separate account. If the manager or the owner is collecting any rents and not paying them to the Trustee, that should also be reported to the Trustee, as it is seriously illegal.
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