What you do when one of your customers owes you money? I don’t care how long you been in business, you’re going to get stiffed. I’m Dan Goldstone and I have over 20 years’ experience in collecting money.
A Reliable Way to Collect on Debts
Now, in dealing with your customers that owe you money they’re probably embarrassed, maybe they’re going through financially difficult times. Everyone has a breaking point; some people respond to gentle nudging, letters, phone calls, emails. Sometimes it takes filing a lawsuit. You might think that’s pretty extreme. I’m happy to tell you that there is a remedy that’s pretty efficient and pretty inexpensive, and that is: utilizing the small claims court system.
Advantages of the Small Claims Court System
Usually, small claims courts deal with controversies of less than $10,000. You are able to go to your local Small Claims Court as a business owner, and you don’t have to hire a lawyer. In fact, in some small claims courts, lawyers are prohibited from appearing. It’s set up to handle your dispute and something that’s important to you. You go to the clerk’s office, go to the counter, and they’ll hand you a form. That form doesn’t have to be filled with legalese and magic language. You can just generally say, you’re owed X amount of dollars, and it’s been due owing in such and such a date.
All you have to do at that point is provide the paperwork and the filing fee, which is usually less than $200. Either you’ll be given a court date at which you and the defendant are required to appear back before that court, or you’ll be given an answer date. The court will take your paperwork and provide a copy to the defendant. The defendant is then given usually 20 days to file a written response. If they don’t, then there defaulted. Similarly, if you appear in court and the defendant doesn’t, they are defaulted.
Now sometimes being in debt is a very nebulous thing. It’s in the air: I am owed money or somebody owes you money. But sometimes, it becomes very real when you have to show up in court.
Getting a Judgment on your Small Claim
What happens when you get adjustment, and what’s the advantage? Well, in most states, you only have 3 to 6 years to file a complaint to recover your money. Judgments are usually good for very long period of time. In Massachusetts for example, judgments are good for 20 years and run interest at 12%.
After you get the judgment, the procedures vary on how to liquidate that judgment. In reality you may want to get a lawyer at this point to go ahead and collect on the judgment. Depending on what state you’re in, judgments can become a lien on real estate if it’s owned by the debtor, or get wage garnishment in many states that allow them after judgment. In many states, bank accounts can be attached, so there’s a full panoply of remedies are available.
Debt Collections Lawyers Operate on a Contingent Fee Basis
You might think, well now I’m back at the beginning where I started, because I now have to get a lawyer. The good news is, there are hundreds of lawyers all over the United States that practice collections law, and they will generally handle collections of a judgment on a contingent fee basis. That means they don’t get paid unless you get paid. And usually as a percentage of the amount that they collect, and you will get your costs back: any filing fees, anything that you spend money on, that gets included in judgments. You’re entitled to that money back if and when your debtor pays you.
So I hope all of your customers pay their bills on time, but if they don’t, you don’t have to hesitate to say, “see you in court.”
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About Dan Goldstone
For over twenty years Dan Goldstone has been advocating for creditors’ rights and has been widely recognized as an expert in accounts receivable management, credit and collections. Formerly, as a practicing attorney, Dan spent eighteen years representing creditors in the various Massachusetts courts, including the United States Bankruptcy Court. From 1993-1995 he served as a Special Assistant Attorney General for the Commonwealth of Massachusetts for the collection of debts due the Commonwealth.
In recent years, Dan founded and presided over Norfolk Financial Corp, a national debt buying company, managing a portfolio consisting of more than 120,000 accounts, with a face value in excess of $360 million. He not only managed the day-to-day operation of the company’s call centers in Massachusetts, Rhode Island and Puerto Rico, but created and managed the company’s attorney network and collection agency placements, interfacing with lawyers and collection agencies nationwide until the sale of the portfolio in 2014.
As a compliance expert, Dan has consulted with a number of lenders and collection professionals to ensure adherence to the provisions of State and Federal consumer protection laws including the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act of 1991. An accomplished speaker, Dan has presented to various organizations including the Massachusetts Bankers Association, the Retailers Association of Massachusetts, the Commercial Law League of America. Dan has also served as an instructor for the National Business Institute, speaking on subjects such as “Judgment Collection Remedies”, “State Court Remedies for Debt Collection”, and “FDCPA Recent Developments and Case Law.”
Dan holds a BA, Cum Laude, in Political Science from the University of Rochester and a JD from the Emory University School of Law. He recently graduated the Owners/Presidents Management Program at the Harvard Business School.