Last year a client of mine and myself entered one of his rental homes immediately after the tenants had moved out. He suspected that the damage to the property was going to exceed the security deposit.
My client had done the background and credit check prior to accepting the 3 family members. They were great tenants the first 5 months and then rent payments started to get later and later, they began complaining that everything was wrong with the home and finally after being late 4 months in a row my client had them evicted. This was the classic story of the tenants moving out in the middle of the night taking the stove, microwave, and selling the air conditioning compressor on Craig's list plus doing various damage to other areas of the home.
The $2,500 deposit was $7,000 short of the cost of damages that were done so my client took the tenant's to small claims court. Naturally, the tenants didn't show up for the court hearing and my client won by default. But what did he really win if they can't be found or if they moved to another state?
Here's where justice comes in to play (justice AKA revenge). I had consulted with a good friend that is also a very aggressive attorney, known for his out of the box thinking. He suggested that my client Gift the money that the court awarded to the tenants, sending the tenants and the IRS 1099s, which he did. The attorney said that he has been doing this to deadbeats for years and what really happens is the penalties and interest usually catches up with the recipients of the gift around years 3 or 4 and causing havoc to those who didn't report the gift money in their tax filings and in many cases their full tax returns are withheld.
My client has set up his calander to send the 1099s to the IRS every year to ensure they know the gift was afforded (maybe a little overkill but if it make him happy then do it).
In short, if you aren't going to get the money from those who owe it to you then let the government get it, and in our current economic situation, they will.