How to collect judgment for 5 month's overdue rent in Fort Worth, Texas?
We got a judgment in our favor. My lawyer's team suggest that the former tenant may be too poor to pay. They are concerned that after we pay for the research to find and locate tenant and their bank account, they may not have anything to pay with. What has been your experience collecting on judgment? Should I find another lawyer or work with bill collection team? Who do you recommend?
#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Houston, TX
You probably won't ever see that money. You got the judgment and the win, but the likelihood of collecting is slim to none.
That's a bummer. Are there no other options?
#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Rental Property Investor
- Houston, TX
Quote from @Rajib Bahar:
That's a bummer. Are there no other options?
You can keep chasing it, but that’s a judgment call. There’s a good chance you’re just putting good money after bad though.
I’d encourage you to just call it a “lose the battle, win the war” situation. Learn from red flags and screening processes going forward (if anything makes more sense in hindsight).
#2 General Landlording & Rental Properties Contributor
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#2 General Landlording & Rental Properties Contributor
You're unlikely to ever see that money. Put a collections agency on it that way someone else is bothering the former tenant and you might see a bit of money, but not waste your time. Make sure it goes on their credit report. The collection agency might also be able to get in contact with the IRS or employer to garnish wages, but if there isn't any money to begin with, it is a waste of time.
Quote from @Rajib Bahar:
This is a common problem. Even if you find their bank account, they'll close it as soon as you garnish something. Find their employer and they'll move to another job.
Find a collection agency that reports collections to the credit reporting agencies. Give it to them and let them handle it. You won't pay anything up front, only a portion of whatever they manage to collect. Write it off, because collections are only successful about 30% of the time and that's usually against people with decent credit scores.
#3 Managing Your Property Contributor
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#3 Managing Your Property Contributor
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- Keller, TX
I could make this a long response but keep it short for simplicity. Your property manager can send the judgement to the collections firm they use. It's doubtful you will see anything come from it. You'll be spending even more money to try and get money from someone that doesn't have any money.
In exchange for being in a landlord friendly state like Texas, where it's easier to evict...it's harder to collect on unsecured debt.
Just move on Rajib and write it off. It's not worth your time.
Quote from @Tony Savage:
Just move on Rajib and write it off. It's not worth your time.
When you say, "write it off", is there a way to "expense unpaid rent"? Thank you
@Rajib Bahar
1. You are unlikely to recover the money
2. Judgement - Execution
If you obtain a garnishment it is likely to be limited. In, Massachusetts garnishment orders have to be renewed every 4 to 6 weeks.
Your Attorney is providing you good advice, it is in their interest to continue the process and bill you. By advising you about the likelihood of failure they are leaving money on the table; they're saving you money and frustration.
Quote from @Colette Major:Yes, in this case, Rajib did not collect five months of rent plus admin and legal fees in the calendar year. When you submit your income and expenses to your CPA it should be documented that you did not receive 5 months of rent plus your attorney fees which you should have receipts for. Your CPA will walk you through it.
Quote from @Tony Savage:
Just move on Rajib and write it off. It's not worth your time.
When you say, "write it off", is there a way to "expense unpaid rent"? Thank you
#2 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
I think you’ll be able to write off the costs of going after the rent but not the missing rent. Imagine if every landlord with a squatter suddenly declared the rent was $10,000/mo. And then they deducted $10k/mo is lost rent from their taxes.
Quote from @Bill Brandt:
I think you’ll be able to write off the costs of going after the rent but not the missing rent. Imagine if every landlord with a squatter suddenly declared the rent was $10,000/mo. And then they deducted $10k/mo is lost rent from their taxes.
Every year you have a vacancy rate from the year before. Your rents weren't collected you will be able a deduction on your returns. Of course it's not a 100% deduction.
#2 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
I don’t think you get any deduction. Unless you want to declare the income you didn’t get and then declare it not collected. (Zeroing out the fake income and expense for no tax deduction.)
Same story as before. I let a house sit 100% empty at $10k/mo rent (or $100k/mo) for a year. What percent of that “missing/lost” rent can I take off my taxes? Pretty sure the answer is zero. I “tried” to rent out a spare bedroom in our house for $5k/mo and got no takers. 100% vacancy/lost rent. Where do I deduct that $60k from my taxable income?
I'm taking my own advice and I sent our discussion to my CPA.
I'm Back
You are correct Bill. My CPA says it's simply a missed opportunity to collect rent and you can not write it off. Good for me to know.