All Things Real Estate: Tim Jones
Q: I am a landlord in Vacaville. Not big time. I just own a duplex and one single-family home I used to live in that I rent out. I had a tenant in one of the duplexes who didn’t pay rent for about six months and I got them evicted. It turns out they trashed the place to the tune of $6,000. So I got a judgment against them in small claims court. Now I have the judgment in hand and have been trying to collect it, more out of anger than anything else. I have been calling the tenants day and night and sending them letters demanding they pay me. Today I got a letter from an attorney demanding I stop trying to collect on the judgment and listing a host of laws he says I’m breaking. He’s threatening to get a restraining order against me. If a court says they owe me the money, why can’t I collect it?
A: It’s hard for me to tell you exactly what’s going on without at least seeing the letter from your ex-tenant’s attorney, since there could be other issues involved.
For example, if the tenant claims he was never properly served with the small claims suit he may be appealing the judgment.
But for the sake of argument, let’s assume the judgment is not being attacked and they simply believe you cannot legally pursue collection. Or at least can’t go about pursuing collection in the way you’ve been doing it.
The first legal issue that popped into the legal side of my brain was that the tenant may have filed for bankruptcy. That’s actually pretty common for tenants in their position. Remember, you likely were not their only creditor.
When someone files for bankruptcy, from the very moment the bankruptcy attorney hits the “send” key and files the electronic documents for his or her client, there is an automatic “stay” that becomes effective.
The term “stay” is simply a legal buzzword that means a federal court has ordered that all collection activities, of any kind, against the debtor must come to a screeching halt. Immediately. That’s true even if the creditor (you) doesn’t even know about the bankruptcy. The stay prohibits phone calls, letters, pending lawsuits, evictions, foreclosures and even tax collection actions.
All creditors, or even potential creditors, must now go through the bankruptcy court in the hopes of getting any money.
By the way, a creditor who violates the automatic stay can have some really bad things happen to them, including really steep fines. So don’t go there.
The letter should mention bankruptcy and the stay if that’s what they’re talking about.
My second thought is your collection activities might violate provisions of either the California and/or federal Fair Debt Collection Practices Acts.
The California version is called the Rosenthal Fair Debt Collection Practices Act and is in the California Civil Code. The federal version, also known as the FDCPA, is in the United States Codes. Both of these laws govern exactly how a creditor can, and more importantly cannot, go about collecting a debt.
These laws apply to any type of consumer debt. Your judgment was based upon a type of consumer debt since you rented the place to the tenant, which is a consumer type of action. The rules are very complicated. But here’s a summary:
A debt collector may not engage in certain specified acts, or “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” That portion of the law can be found in the United States Code at 15 USC §1692d, if you care.
But you get the idea. The goal of these laws is to prevent a consumer from being harassed by a bill collector. And once again, bad things can happen to creditors who violate these rules.
My suggestion is to do one of three things, in no particular order:
- Contract with a collection company to pursue the debt. You’ll pay something like 35% of what they collect in commissions, but they know what they’re doing.
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Hire a lawyer who specializes in collections. My hunch is you’ll find out the amount they owe won’t justify the costs of hiring an attorney.
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Buy a good book on California collection practices and study it. Collecting legally isn’t rocket science, but it will require a big-time investment on your part.
There’s a good reason why most landlords don’t bother filing small claims actions against ex-tenants. The collection process can be onerous and, at best, the landlord may wind up with only pennies on the dollar.
Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like to have answered in this column, you can send an email to [email protected].