⚖️Illinois Bankruptcy Court Decision: Security Deposit Debt Survives Bankruptcy! ⚖️

In Klonecki v. Schwarz (Bankr. N.D. Ill., Nov. 6, 2025), a landlord failed to return a $10k security deposit or provide proper itemization after a short-term Northbrook rental.

Court Ruling:
– Tenant awarded $19,644 + reasonable attorney’s fees under Cook County Residential Tenant & Landlord Ordinance (CCRTLO § 42-811).
– Debt DISCHARGEABLE under § 523(a)(2)(A) — no fraud or false pretenses proven.
– Debt NONDISCHARGEABLE under § 523(a)(4) as defalcation while acting in a fiduciary capacity — landlords hold security deposits in trust; violations trigger double damages that survive bankruptcy.

Key Takeaway for Illinois Landlords & Tenants:
Proper deposit handling is mandatory. Mishandling = nondischargeable debt in bankruptcy. Know your rights!

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