Sometimes, life has a way of coming at us fast. An employment situation suddenly changes, a relationship ends, finances get upended – and for one reason or another, the need to move suddenly appears. Since you never were much of a fan of your landlord anyway, you decide to skip out on the remaining months of your lease. No big deal, right? Or maybe you do no such thing, but instead, prior to completing the lease, you cause damages to the apartment beyond the amount of your security deposit.
What happens then? Or what about if you’re simply behind on your rent and your landlord has gotten tired of cutting you slack and instead creates a record of your unpaid rental debt on your credit report? In any of the above instances, apartment debt gets created – and like any other delinquent debt, apartment debt needs to be addressed before causing any further damage to a credit score and profile. A low credit score due to apartment debt could hurt your chances of renting in the future. Learn what apartment debt is and how to pay off your apartment debt.
How To Pay Off Apartment Debt
Leaving apartment debt on your credit report is not a good idea because the presence of it can impede your ability to rent another apartment. Although it is possible to find apartments for rent by private homeowner landlords who do not require a credit check, and then maybe you can squeak by – there’s no question that plenty of landlords and property management companies will require a credit check – and then what? Do you really think another potential landlord will greet you with open arms when you’ve got apartment debt showing from your previous rental? Not likely.
In these cases, doors are literally closed to you. Your best case scenarios will involve paying a larger security deposit than usual to calm concerns of the landlord and/or to bring in a close friend or family member willing to serve as a co-signer on the lease. Clearly, it becomes important for you to address the apartment debt situation with your previous landlord and discuss ways to implement measures that solve your apartment debt problem.
Landlords must obey the Fair Debt Collection Practices Act by putting an overdue debt notification in writing and allowing thirty days for any dispute of the claim. If you still live in the apartment at the time, a failure to pay the debt can lead to eviction proceedings. A landlord can also file a civil lawsuit when a tenant neglects to pay past due rental debt. The tenant is notified of a pending civil suit through an official court summons and complaint, which the tenant must respond to within the county court’s specified time period.
At this point, the tenant should attempt to negotiate apartment debt settlement or a payment plan with the landlord after having received the court summons related to the impending lawsuit. Not responding at all to the summons, or not showing up to court on the stated court date simply isn’t an option – in this instance, a judge will automatically rule for the landlord, who will have the legal right to recover the apartment debt through wage garnishment – or to garnish funds directly drawn from a bank account. Not pretty.
The alternative to a landlord pursuing legal action is for a landlord to enlist the services of a collections agency. Apartment debt collection then involves the collection agency contacting you repeatedly by telephone and by mail. The landlord will be more than happy to supply the collections agency with your phone number and address, and from there, life becomes more stressful, with the collection agency also reporting your apartment debt to the three major credit bureaus (Experian, Equifax and TransUnion) and the delinquent apartment debt staining your credit profile and lowering your credit score.
This then invites the question, can I rent an apartment with collections? Not so easy, as we’ve already discussed – you’d better find a homeowner landlord who trusts you implicitly and doesn’t care about running a credit check.
Apartment Debt Settlement
If your apartment debt does get sent to a collections agency, contact the agency to discuss payment options. If you can’t afford to pay the amount owed in one lump sum, talk about a payment plan – or look into pursuing apartment debt settlement, which could be your best option.
Apartment debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed. The lower settled amount is agreed to by the collection agency and is fully documented in writing. Landlords will frequently grant collection agencies blanket authority to negotiate and accept apartment debt settlement offers that are 70% or greater than the total amount owed. If a suitable settlement offer is made by the tenant and then accepted by the collections agency, the landlord, upon receiving the settlement funds, will send a clearance letter to the debtor, who becomes relieved of the remaining debt balance.
Many tenants may not realize that apartment debt settlement is actually an option for them, but experienced landlords are well aware of apartment debt settlement and will accept it as a last resort when they recognize a delinquent debtor who suddenly becomes motivated to pay off apartment debt – rather than disappearing into the sunset and never paying anything.
Experienced landlords understand that “problem tenants” are at times inevitable, and therefore often seize the opportunity to accept reasonable apartment debt settlements when a delinquent tenant becomes motivated – and this happens for any number of reasons – including the tenant’s desire to rent a different (credit-checked) apartment, or to secure a mortgage or some other loan.
While many landlords feel bitter and reluctant about accepting settlement offers, apartment debt settlement exists as an option for both sides partly because landlords understand that if they don’t act reasonably quickly to a settlement offer, the tenant can slip away without ever paying anything – especially when a tenant’s urgent need to clean up a credit report changes as a result of renting a different apartment or successfully securing a mortgage.
About the Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.