One suggestion: From a purely pragmatic point of view, it makes more sense to try and reason with the guy now–if it works you win, and if it dosen’t, you can sue him latter. He probably knows he is being as ass, and feels bad about it, but dosen’t know how to work with you.
The first thing I would do is tell him, calmly, why you are not satisfied with the idea of using his deposit as his last months rent. Tell him that all your previous tenants have left the apartment in a state where you had to spend $200 or whatever to have it cleaned (even if you clean it yourself the lost oppurtunity cost is whatever it would have cost you to call a cleaning service), and that this cleaning comes out of that deposit. Give him the option of paying half the rent now, and taking the other half out of the deposit. If he says he can’t do that (and if the money is not there, it is not there) stress that if the apartment is not spotless, you will have to come after him and ruin his credit. Detail how you will do that. Make it clear to him that you would prefer to work with him and find a resolution you can both live with (after all,if the apartment is clean and undamaged and you have your money you have everything you want, right?) but that you are willing to take steps.
Keeping the relationship amaible is important. If you are an ass, he will just transfer his feelings of guilt into feelings of anger towards you. Let me give you an example. I have a good friend who, two years ago, had to quit work to take care of her mother, who was dying of cancer. She was 21, and had no other family. The month her mother died was also the month that her savings ran out—you can imagene this was a high stress situation. There was some life insurance due her, but there was a snafu at the company and it took some weeks on the phone to straighten things out. In the midst of this she had a rent payment due, and simply did not have the money. She had always been on time to date, and she called her landlord and explained the situation. On the phone he was all smiles and undertanding–but threee days later she came home to find an eviction notice on the door. On top of everything else, this just crushed her. After that, she felt no compulsion to work with this guy or explain anyhing to him, or do more than the bare minimum that she was required to do by law. (She usually leaves apartments clean when she moves out-she just left this place) If he wasn’t going to give her the benefit of the doubt after a year of amiable relations, she wasn’t going to bother being a model tenant.
I am wondering, just from reading your story, if something similiar is going on here. This guy may well be willing to work with you, but you are not making your concerns clear to him–you are immediatly starting to comunicate through legal ultimatiums. Putting his back to a wall is not going to get you your money, ever. It will just ruin his life. He may never have thought of cleaning costs and such. Sit down and frankly telll hm your concerns. If he can do what needs to be done–and he may well have no money but have 3 friends that are willing to help him cl;ean the hell out of the place, you win, and he is out of a diffucult spot. On the other hand, if he screws you over, ruin his credit so that he won’t get a chance to do it to the next person. Delaying it by two weeks won’t change anything.