Tenant moved out, filed for bankruptcy

[Mohan Deep]

My tenant moved out but left a lot of damage to the property. After they moved out, they texted me saying that they filed for Chapter 13 bankruptcy and that I should contact their lawyer. They gave me the lawyer's phone number to call. After talking to a legal analyst at the lawyers office, she indicated that I cannot communicate with my ex-tenant. I have not received any official notification from anyone, yet and the tenant is non-communicative. I have their security deposit but the damages are 3x the security deposit. The property is based in Milwaukee, WI. I saw a lot of threads that talk about tenants filing for bankruptcy while staying in the property but this is a slightly different situation. 

My specific questions are:

1. Am I still required to send a security deposit statement showing the amount they owe to me? 

2. Is there any hope for me to ever recoup my loss? 

3. What are my responsibilities and duties as a landlord in this case? 

Appreciate your input. 

[Grace Gudenkauf]

I am not a lawyer but you are likely required by your state law to give a receipt of work completed if you are keeping their deposit. I would list out all damages (the full 3x amount you're claiming). The receipt also likely needs to be provided to the tenant within 30 days of their lease ending. Unfortunately, in this scenario you are probably are not going to recoup your loss. The thing is, they don't have any money to repay you. You could go to small claims over this but the time and money spent is likely not worth it. I just evicted my first tenant last year and had to go through this emotional rollercoaster of not pursuing the money because I knew she simply didn't have it. So, I feel your pain. On the bright side, take any and all lessons learned you can from this (Better screening? Higher income or credit requirements? Shorter leases? Quarterly Inspections needed?) and use it to continue to build your empire. Good luck. 

[Mohan Deep]

Thanks, Grace.

Your response made me re-read my first question. It really should read as:

1. Given that the tenant's lawyer has requested me not to communicate with the tenant, should I send them a security deposit statement showing the amount they owe me? My statement will include the receipt of work completed. 

[Grace Gudenkauf]

Quote from @Mohan Deep:

Thanks, Grace.

Your response made me re-read my first question. It really should read as:

1. Given that the tenant's lawyer has requested me not to communicate with the tenant, should I send them a security deposit statement showing the amount they owe me? My statement will include the receipt of work completed. 

 If the lawyer said not to contact them then send it to their lawyer. 

[Matt Devincenzo]

I'd talk to a BK atty that works for creditors (I have one I can refer and I used from another BP member referral). My layman's thinking is you have not been served as a creditor, and have not been legally barred from reaching out to the tenant, so you can probably simply mail their statement to them and it won't be an issue. That said, you've heard you're not supposed to but you're not technically a creditor yet but could be. So you could possibly play it safe and send it to their atty directly. 

Personally I'd do whatever my atty told me to...It's probably a couple hundred bucks to make sure I'm meeting the req's of both the security deposit laws and the BK laws when I send them info. 

[John Underwood]

The attorney can't tell you to skip your legal obligation.

I'd send the statement to the tenant certified mail. You could send a copy to their attorney. 

You might be able to file a statement of damage and what is owed with the bankruptcy court. Then I would move on and not expect anything in way of restitution.

Count your blessings this person voluntarily left your property. 

[Theresa Harris]

Send it to the tenant and a copy to the lawyer.  You are unlikely to see any of that money, so work on moving forward and getting it rented.  Also make sure you take photos of the damages.

[Henry T.]

Don't listen to the attorney. Do your job as required. The only person that can tell you what to do is a judge. Most attorney's are total idi......oh, never mind.

[Lynn McGeein]

I'd follow landlord/tenant laws regarding itemization of damages and return of security deposit, including a bill for damages exceeding the deposit.  There's usually a time limit to have this mailed, and if tenant did not provide a forwarding address, I'd mail it to their last known address, as they may have forwarded their mail with the USPS.  I'd also mail a copy to their attorney if I knew they had one, to be added to list of people they owe money to in the bankruptcy.  In my area, if landlord does not provide the itemized statement within proper time frame, the tenant has right to their full security deposit back, even if they caused damages, so I would make sure I followed proper procedure to protect myself.  

[Marcus Auerbach]

Wisconsin State law requires you to send an itemized security deposit deduction letter with 21 days, not 30.

By the way the RPA (rental property association) has the next Landlord bootcamp on April 13th - it's a whole day of legal training for property owners and managers. Sign up at RPAWI .org 

I have enever been able to recoup for damages beyond the security deposit. Goes back to better screening, regular inspections and better leases. I use Wisconsin Legal Blank. 

[Mohan Deep]

Quote from @Marcus Auerbach:

Wisconsin State law requires you to send an itemized security deposit deduction letter with 21 days, not 30.

By the way the RPA (rental property association) has the next Landlord bootcamp on April 13th - it's a whole day of legal training for property owners and managers. Sign up at RPAWI .org 

I have enever been able to recoup for damages beyond the security deposit. Goes back to better screening, regular inspections and better leases. I use Wisconsin Legal Blank. 

Good point Marcus. Based on your prior response to one of my posts, I bought WLB leases. I do have a question about this "itemized security deposit deduction letter". Do I have to share the invoices that I paid to various contractors to fix issues and copies of the receipts for the items I bought with this security deposit deduction letter? Or should I just keep those supporting documents with me in case it is needed in the future? 

[Bruce Woodruff]

Like @John Underwood said....you are lucky to get off this easy. And IMO, it is unlikely you will ever see any money from this clown. Just lick your wounds and move on. Hopefully to a better tenant this time!

[Tim Miller]

First thing first, until you receive official notice from the bankruptcy court, you are free to continue to try and collect the debt you are owed.

Now sit aside the lawyer and ch 13. You have to follow your local laws regarding landlord-tenant issues. Since they are gone, you have to put together the cost of damages, lost rent and any other cost to get this unit re-rented. Then you need to send this information to the tenant (include the lawyer) stating security deposit amount minus repair and re-renting cost, you owe X dollars. State that you will file a suit in your local court to get a judgement.

They are going to say you can't do this and this is where you either say "see you in court" or "talk to my attorney". Just remember that if they do file for BK, then you have to stop all legal actions and collection. You'll want to file with the BK court what is owed to you. Doubt that you'll see a penny but you won't know until you do. Good luck!

[Gregory Chadwell]

Quote from @Mohan Deep:

Quote from @Marcus Auerbach:

Wisconsin State law requires you to send an itemized security deposit deduction letter with 21 days, not 30.

By the way the RPA (rental property association) has the next Landlord bootcamp on April 13th - it's a whole day of legal training for property owners and managers. Sign up at RPAWI .org 

I have enever been able to recoup for damages beyond the security deposit. Goes back to better screening, regular inspections and better leases. I use Wisconsin Legal Blank. 

Good point Marcus. Based on your prior response to one of my posts, I bought WLB leases. I do have a question about this "itemized security deposit deduction letter". Do I have to share the invoices that I paid to various contractors to fix issues and copies of the receipts for the items I bought with this security deposit deduction letter? Or should I just keep those supporting documents with me in case it is needed in the future? 

 If you don't give them an itemized security deposit deduction sheet within 21 days of moveout you could be liable for double damages for the security deposit.  see 

Wisconsin Legislature: administrativecode/ATCP 134.06

[Jessie Dillon]

for 1. ask YOUR real estate attorney.

for 2. probably not, move on.

for 3. ask YOUR real estate attorney.

[Natalie Medved]

Quote from @Matt Devincenzo:

I'd talk to a BK atty that works for creditors (I have one I can refer and I used from another BP member referral). My layman's thinking is you have not been served as a creditor, and have not been legally barred from reaching out to the tenant, so you can probably simply mail their statement to them and it won't be an issue. That said, you've heard you're not supposed to but you're not technically a creditor yet but could be. So you could possibly play it safe and send it to their atty directly. 

Personally I'd do whatever my atty told me to...It's probably a couple hundred bucks to make sure I'm meeting the req's of both the security deposit laws and the BK laws when I send them info. 

[Natalie Medved]

Quote from @Matt Devincenzo:

I'd talk to a BK atty that works for creditors (I have one I can refer and I used from another BP member referral). My layman's thinking is you have not been served as a creditor, and have not been legally barred from reaching out to the tenant, so you can probably simply mail their statement to them and it won't be an issue. That said, you've heard you're not supposed to but you're not technically a creditor yet but could be. So you could possibly play it safe and send it to their atty directly. 

Personally I'd do whatever my atty told me to...It's probably a couple hundred bucks to make sure I'm meeting the req's of both the security deposit laws and the BK laws when I send them info. 

DO NOT CONTACT THE DEBTOR-TENANT. This is bad advice and could expose you to significant liability. 

There is a reason the attorney told you not to contact the debtor-tenant and it’s called the automatic stay (see 11 U.S.C. section 362). Generally, when a debtor files for bankruptcy the automatic stay goes into effect, which is an injunction that enjoins pretty much every type of collection activity (look up that code section and read through the subsections).

As a landlord, you even contacting the debtor-tenant with a bill or amount due or otherwise could easily be viewed as a violation of the automatic stay, which could expose you to liability (attorney fees, actual damages, punitive damages, emotional damages). See 11 USC section 362(k)(1).

Here’s the deal, just because the tenant filed doesn’t mean you are completely screwed. I don’t have enough details but the fact that the the tenant filed for ch. 13 could be encouraging.  A chapter 7 is a straight liquidation while a 13 is a an individual reorganization.  In a chapter 13, the debtor is required to submit a chapter 13 plan that proposes a repayment plan over a term of 3 to 5 years and allows the debtor to restructure debts or other obligations. Each case is different and you have no idea what the debtor’s attorney is going to propose in the chapter 13 plan.  

You have actual notice of the bankruptcy (and hopefully the bankruptcy case number) so your next step should be calling the Clerk’s office of the bankruptcy court to make sure you are on the creditor mailing list / requesting notice of anything filed in the case and— this is important— 
Confirming the Proof of Claim filing deadline and filing a claim in the case for whatever damages you have pursuant to the lease (with a copy of the lease) and any other supporting documents ASAP.

By doing that, you can protect your ability to be paid out as an unsecured creditor with everyone else in that class (or perhaps a different class of creditors with a higher priority- not sure what your situation is so I can’t comment).