But, the commission can also impose a civil penalty of up to $1,000 and/or the amount of the commission the person received up to $5,000, and put it in the Real estate recovery fund.  

@Art Maydan almost all insurance companies require, or like to see the lease make a recommendation for and require (in states where it is allowed) renters insurance.It adds an extra level of protection for you and your insurance carrier against liability lawsuits and possibly subrogation (recovery of the claim payout) of damages your tenant has caused.

The So Cal market had a nice recovery.  

Collection companies generally do not take it that far.Judgement recovery companies might buy the judgment for 10 to 20 cents on the dollar if they feel the debtor is collectible.

Unfortunately in these kinds of cases, unless it's a large commercial project, it can be hard sometimes to find an attorney to take the case (particularly someone who specializes in that type of work) because of the  time and cost involved as compared to the total amount of recovery. 

Low in the recovery cycle there are tons of chairs to sit on.

How many years of positive cash-flow during the recovery/appreciation cycle went to offset those negative cash-flow years?  

In a "bubble" your strategy should be no different than it usually is... you should always be seeking ways of limiting your risk through (1) acquiring well built properties in (2) good neighborhoods for (3) below market price using a (4) conservative financing / debt structure, (5) buying only properties that you can improve, and (6) offering them to customers (your tenants) at competitive rental rates, and (7) managing them well.If you are actively doing these things, the market phases isn't as relevant... you will always be able to offer a good product and service to a paying high quality customer (your tenant).If you're below there is a market bottom coming, it also may make sense to horde your cash and acquire when you believe the market you're watching has hit bottom and is beginning a recovery.

You may want to look for cities that have struggled in the past 5-10 years and are now in recovery mode. 

You may want to look at setting it up as clean house or recovery house.