Bankruptcy Alert - A Judgment for Violation of the City of Chicago Residential Landlord and Tenant Ordinance May Not be Dischargeable in Bankruptcy


The Bankruptcy Court for the Northern District of Illinois recently held In the matter of Frempong, 2011 WL 4906815 (Bkrtcy.N.D.Ill. October 14, 2011), that a judgment entered against a landlord for violation of various sections of the City of Chicago Residential Landlord and Tenant Ordinance (“CRLTO”) was not dischargeable in bankruptcy.  

In that case, former tenants of the landlord filed suit in the Circuit Court of Cook County and sought damages for the following violations of the CRLTO:  (1) failure to properly deposit and hold their security deposit; (2) failure to pay interest on their security deposit; and (3) failure to return the security deposit or provide a proper accounting of it.  The tenants prevailed on their claims and the Circuit Court of Cook County entered a judgment against the landlord.

The landlord subsequently filed for Chapter 7 bankruptcy and sought to have the judgment entered in the Circuit Court of Cook County discharged.  The court held that the landlord’s violations of the CRLTO constituted a defalcation under Section 523(a)(4) of the Bankruptcy Code and were, therefore, nondischargeable in bankruptcy.  The court further held that the landlord remained responsible for damages pursuant to the CRLTO in the amount of two times the security deposit, plus the return of the security deposit, interest, costs and the tenants’ reasonable attorney’s fees.  

If you have any questions about how this case might impact your rights or would like further information on this topic, please contact us.

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