The question I would have is if you hired an agent, did they use the standard lease agreement CAR Form LR (Residential Lease or Month-To-Month Rental Agreement). If yes, under section 4, item b, it states "All of any portion of the security deposit may be used, as reasonably necessary, to: (i) cure Tenant's default in payment of Rent (which includes Late Charges, NSF fee or other sums due)". So you legally can keep the deposit.
One thing that you MUST do is when you enter the property, take a video camera or still camera, make sure the date stamp is turned on and take photos of everything! This way if the tenant tries to sue in small claims court you have documented evidence of the condition of the home at the time they left. Make sure you have someone with you at the time you go through to verify that you entered and it can't be someone who has a financial interest in the transaction (not a spouse or any person you own the property with).
My gut feeling is they will not sue, but you can't be too careful.
I am sorry that you had this awful experience, but we live in awful times.
If I can be of any help, please let me know.