Hand over to collection or pursue myself?

Question

Hey there!

Our tenant owes us 3700$ and he said he is planning to file for bankruptcy.

Somebody mentioned that instead of turning the debt over to collection (which charges 40% of collected debt), I can do this effectively myself.

Do you agree? If yes, how do I do that?

Please, note I only have tenant's phone and email, he did not provide a forwarding address, however he did mention he wanted to work at a farm near Lubbock, TX.

Tom S. · Answer

@Edita D.  I've never had any luck with collection agencies either; they generally seek high volume accounts.

To do it yourself, Follow your states small claims court process.  Here in Vermont you have to send the complaint to their last known address and if they don’t answer within 30 days, a sheriff has to serve them.  You’ll have to figure out the defendants address.  Then either they won’t answer and you’ll win by default, or go to court.  Collecting is a whole another challenge beyond that.

If the tenant truly may file for bankruptcy, it’s probably don’t worth the effort.  I’m assuming you pulled their credit when they applied, so whether they have good credit now, or really don’t care, is a determination you’ll have to make.

Good luck!

Tom

Marcia Maynard · Answer

We ask the tenant for their forwarding address on the form they fill out for giving legal notice "Notice to Vacate." We ask for it again on the form they fill out to verify they have moved, "Return of Possession".  If for some reason the tenant did not give a forwarding address, they may be having their mail forwarded, so send your communications to the unit they just vacated. Send letters as regular first class mail. Under your return address, write clearly the words "Address Correction Requested." That way the Post Office will notify you of the tenant's new address during the process of forwarding the mail to them, if they have it.

From the post office website: Address Service Requested - In the first year after the recipient moves, the mail is forwarded. You’ll be given their new address and charged an address correction fee. In months 13-18, the mailpiece is returned to you with the recipient’s new address, at no charge. After 18 months, the mail is returned with the reason it couldn’t be delivered, for no charge.

Get you debt recorded before he files bankruptcy, then you will be in line in the list of creditors. He may or may not be awarded bankruptcy status. Don't let him manipulate you in delaying your actions, based on his intent to file bankruptcy.  Follow what is allowed by landlord-tenant law for your jurisdiction. If he doesn't respond in a timely manner to your invoice for the amount due, then send a demand letter.

I've seen too many landlords simply give up on a debt they thought was going to be impossible to collect, or they delayed in pursuing it. Myself included. Now I follow a process and stay timely and don't miss a beat. If I don't have luck collecting the debt, I turn it over to a collection agency. They at least can give it a go and notify the credit bureaus, which will hold the tenant accountable and warn others who check their credit.

It really depends on the tenant, your relationship during the tenancy, and what incentives the tenant has to pay what is owed. One of our tenants of 7 years moved out of state. There were significant damages from the tenant and his daughter smoking in the apartment, despite our strict no smoking policy. In my final report on return of deposit, the damages exceeded the security deposit. The amount owed was $1350. I sent the letter to him with the final accounting. I stuck to facts and noted the $1350 was due within 30 days. I also kept the tone of the letter cordial. A few weeks later we received a money order from him for $1350. :-)

Thomas S. · Answer

Without having all your tenants information including his social insurance number etc. it will be extremely difficult for you to collect.

Go to your local small claims court office and research what info you need to file.

Inherited tenants are usually the biggest source of problems for landlords and unfortunately most landlords selling a property with tenants in place are often the worst landlords. It is extremely important when buying with tenants that you force the seller to gather and provide all tenant info.

Tom S. · Answer

@Edita D.  Yes, correct on both.

Edita D. · Answer

Thank you @Tom S.

1.The Rent Recovery is this webiste, right?

http://www.rentrecoveryservice.com/

2. And Mr. Landlord is this, right?

http://www.mrlandlord.com/7/

Thanks so much!

Edita

Tom S. · Answer

@Edita D. I use both Mr Landlord and Rent Recovery to report, about a $20 fee to report to the credit bureaus and no, generally no further expense if they don't collect. They each have they own policies and packages depending on what you want to spend.

For getting a judgment I usually do it right away because I know their forwarding address or other current info.  But for collecting , judgements (at least in VT ) are good for 8 years and can be renewed for another 8.

I'll usually sit on it for a few years because they have no money in the beginning , as they couldn't even pay rent. But a quick Facebook search a few years later and they're bragging about a new job, and then hit them up with the judgment.  60/40 odds on collecting. But I currently have people sending me monthly payments - woot woot !

Good luck,

Tom

Edita D. · Answer

@Tom S., I see you never had any luck with collection agencies. At least you don't have to pay them if they can't collect, right?

I still can't believe the tenant can get away with this!! It's unfair, but business :) I may have to just realize this will be my loss rather than spending all this time to try to collect myself...

Edita D. · Answer

@Marcia Maynard, you recommend that I get my debt recorded. How do I do that? My main goal is to inform the 3 credit bureaus about what he owes.

Edita D. · Answer

We inherited the tenant when we purchased the property.

Thank you for your inputs @Marcia Maynard and @Tom S.!

Hand over to collection or pursue myself?

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