When a former tenant disappears while owing you money, there are a couple of things you need to do before you can collect on the debt: find out where they live and get the court to issue a money judgment against them. Once you’ve obtained the new address and a money judgment, you’re in a much better position to take action and collect what is owed. The legal system provides several solutions for landlords trying to collect unpaid debts from their tenants, including these four options:
1. File an Abstract of Judgment
Even if you win a lawsuit against a deadbeat tenant, it can be tough actually collecting the money that is owed to you. Sometimes, the only way to get a former tenant to pay up is by filing an “Abstract of Judgment” at the office of your county recorder. This abstract briefly summarizes the judgment you’ve won against the tenant and places a lien on any current or future real estate they may own in the area. A lien will get the tenant’s attention and possibly persuade them to settle the debt.
2. Report to the Credit Bureaus
Eventually, your former tenant will want to lease a new rental property, obtain a car loan or get approved for a mortgage. Report this unpaid debt with the three major credit bureaus; a red flag will appear on the tenant’s credit report, which can greatly impact their ability to get any type of credit down the road. The debt will appear as a collection account on his credit report and lower his credit score. Plus, this red flag on his credit report will serve as a warning to other landlords in the future when he tries to rent from them.
Since a low credit score will reduce the tenant’s ability to rent or purchase other property in the future, his only option may be to settle his debt with you or at least set up a payment plan to get the red flag removed from his credit report.
3. Garnish Wages
Once a money judgment has been issued against the tenant, you can file a motion to have his wages garnished in order to collect the money that is owed to you. The court will order the tenant’s employer to withhold a certain amount of money from every paycheck until the debt is paid off. With a wage garnishment, federal law allows you to collect the lesser of these two:
- Up to 25 percent of your former tenant’s disposable income, or
- The amount that his income exceeds 30 times the federal minimum wage.
The tenant’s disposable income is established by subtracting certain deductions from his total paycheck. A legal professional can provide you with the exact deductions used for this calculation.
4. File a Bank Account Levy
Another way to collect on a money judgment issued against your former tenant is by filing for a bank account levy with the court. A levy requires the bank to remove money from the tenant’s checking account in order to settle the debt. If there are not enough funds in the bank account to pay off the debt, the bank will empty his account and send whatever funds are available.
Although you could theoretically file another bank account levy against the tenant in the future to collect the remaining balance owed, don’t be surprised if the tenant closes the account to avoid your collection efforts.
Keep in mind you must have the former tenant’s checking account information to obtain a levy. This shouldn’t be a problem if you kept copies of the checks he used to pay rent during his tenancy, just as long as the account is still open. However, if the tenant closes the account and opens a new one, it may be impossible to obtain information about the new account.