How To Collect on Back Rent and Damages Not Covered by a Deposit
Having to go through eviction or finding out that your tenant disappeared in the middle of the night with all appliances is a nightmare every landlord dreads.
Thankfully, this is rare if you screen your tenants thoroughly, and there is something you can do to recover some or all of the money you are owed.
Here are the steps you can take to collect on back rent and/or damages.
- After evicting the tenant and regaining possession of the rental, you need to send them a collection letter for the total amount due. If they don’t pay you can file a lawsuit to get a judgment for the money they owe you (if the eviction didn’t include that)
- With the money judgment against the tenant, contact the local Sheriff (or the appropriate “levying officer”), give them your tenant’s employer information, and they will serve the garnishment order to the employer.
- Alternatively, you can sell your judgment. Don’t expect more than 6-10 cents on the dollar.
- Another option is to contact a collection agency to deal with collecting the debt. You can hire a collection agency even without getting a money judgment. Expect to pay 50% percent commission if they collect.
Suing a Tenant for Back Rent and Damanges
You can sue tenants for unpaid rent and damages beyond what their deposit covers.
When evicting a tenant, a landlord can seek possession judgment, money judgment, or both. Most property owners file for possession only because it’s less complicated and faster.
But what happens after a tenant is evicted with possession judgment only and the landlord wants to sue for back rent and damages?
The next step will be to file a lawsuit in Small Claim Court and seek a money judgment
How To Collect on the Money Judgment
There are three ways to collect on a judgement:
- You can hire a collection agency.
- Try to collect yourself
- Sell the judgement
Hire a Collection Agency
There are some agencies with an excellent reputation, like National Credit. However, typically you need to split the recovered money 50/50. That’s more than zero, and it’s a no-hassle solution for the landlord or property manager.
Tenants will not be able to buy a house or even rent a place until they pay off the judgment.
A collection agency will ask for three things:
- Social Security Number
- Date of Birth
- Court Judgement
DIY Collection and Wage Garnishment
Collecting on the judgment is possible with some free time and patience. The process may vary from state to state. If the tenant doesn’t pay, you can garnish their wages. In some states, this is not allowed.
What you need to do is contact the local “levying officer”, the Sheriff in most cases who is responsible for serving the garnishment order.
You need to provide them with the name and address of the current employer of your tenant.
If the tenant finds another job, this order will need to be updated.
To find out if your tenant currently works and who is their employer, you may have to look at their social profiles. Many people make this information public.
I’ve heard mixed reviews on the level of success regarding wage garnishment. There are a lot of conditions, for example:
- The debtor needs to be employed. They can’t be self-employed or have LLC.
- You can only garnish 25% of their disposable income.
- Their income must be above the poverty line. It must exceed 30 times the minimum wage, whichever is lower.
- Their salaries are being garnished already.
- They are exempt from wage garnishment – for example, they are a head of household.
- Income from social security, disability, retirement, child support, and alimony doesn’t count.
Sell Your Uncollected Judgment
There’s a site called Judgement Marketplace where you list your uncollected judgments, and people and companies bid on the. Usually ends up paying around 10 cents on the dollar, but might be higher for a more significant amount.
How long does the landlord have before filing a lawsuit for unpaid rent or damages?
Each state has a different law. However, most have specific time frames for notifying tenants about intentions to impose a claim on their deposit.
If the deposit wasn’t enough to cover the damages and the unpaid rent, the time frame is 2-6 years.
Can a landlord sue for unpaid rent without a written lease?
Oral leases are enforceable despite what people think. There should be enough evidence that the tenant was paying rent. If the tenant was paying cash and the landlord did not keep a ledger, it won’t be very easy to prove that they owe back rent.
The only exception to this is longer leases, typically leases over one year need to be written and witnessed.