Legal Question in Bankruptcy in Virginia

Re: Filing Chapter 7 with a investment property with tenants in it

I understand from your message that this property has a mortgage for more than the value of the property. If you intend to give up the property, you most likely have no obligation to the tenants other than to refund any security deposit (it will be abandoned by the trustee back to you, with the lender free to foreclose). Your safest bet would probably to allow the foreclosure to occur pre-filing (to be sure there are no post-petition issues with respect to the tenant) unless that would cause a taxable capital gain, in which case you want the foreclosure to occur while the bankruptcy case is pending -- in the event of a potential taxable gain, you should speak IMMEDIATELY with counsel experienced in tax-related bankruptcy matters. If you want to keep the property, you need to determine whether there is an assignment or lien on the rent in favor of the mortgagee (lender), because if there is not, the trustee could potentially claim the rents (at least past-due rents) as assets of the estate even if the property itself has no equity. This would cause you to have to make the mortgage payments with no rent to cover them. You should consult with experienced bankruptcy counsel well before filing to discuss these issues.