When running a business, it's practically inevitable to experience minor disputes of one kind or another. Whether it's a customer who refuses to pay their bill, a vendor who doesn't deliver the goods you've ordered, or a contractor who fails to meet the terms of their agreement, such conflicts are a simple fact of doing business.
Yet taking these matters to civil court often isn't an option due to the time and expense involved, especially when you're only looking to recover a few thousand dollars. And with average fees running between 25% to 50% of the total amount recovered, collections agencies can be equally cost prohibitive.
While such disputes can be handled privately or through mediation, this is not always possible. If so, taking the matter to small-claims court may be your best option. Indeed, sometimes small-claims court can be the only way to resolve disputes involving relatively small amounts of money, anywhere from a few hundred to several thousand dollars.
If you're thinking of taking your case to small claims court, here are a few quick answers to some common questions about the process.
What is small-claims court?
Small claims courts are real courts, and a judgment issued by a small claims court is just as binding and enforceable as a judgment in a traditional civil court. However, these courts only hear cases involving minor monetary disputes, typically between $3,000 and $15,000. Small-claims court is often a quick and inexpensive way for your business to collect overdue bills and solve contractual disputes with customers and other companies.
That said, you can only take your case to a small-claims court if the money you're seeking to collect is below a certain amount, known as the court's “jurisdictional limit.” These limits are different for each state, with some are as low as $2,000 and others as high as $25,000, so be sure to check our state's limit before heading to court.
Do I need an attorney?
Small-claims court is designed to be easy to navigate without the need for an attorney. Indeed, avoiding costly attorney's fees is one of the primary benefits of these courts. Some states even prohibit lawyers from being present.
If the need arises, however, you can consult with an attorney to assist you in the preparation of your case and/or advise you about how to proceed.
How does the small-claims court process work?
The process of taking your case to small-claims court is designed to be quick and easy. It begins when you file a complaint with the county where the case will be held. You can get all of the necessary paperwork and fill it out yourself. You'll need to pay court fees, but they're typically quite low, ranging from $20 to $200. The court will then set your trial date, which will typically be a month or so from the time you filed.
Small-claims hearings are fairly informal and don't involve complicated legal procedures or strict rules of evidence. That said, you still need to prepare and present your case before the judge. To this end, be sure to bring all of the documentation needed to help prove your case, such as contracts, invoices, photos of damages, copies of emails, and/or sales receipts. Some states also allow you to call witnesses.
One of the best parts of small-claims court is the time is takes for your case to be decided. Unlike cases in traditional civil court, which can drag on for months or even years, a small-claims judge will typically issue judgment on the spot once both sides have presented their arguments and evidence.
Can you appeal your case if you lose?
In many states, the plaintiff (person who filed the case) cannot appeal if he or she loses. If the defendant loses, he or she can generally file an appeal, and if it's accepted, a new trial will be held in a higher court. Upon appeal, the small-claims court trial is completely negated, as if it never happened.
How do I collect a judgment?
If you win your case and are awarded a judgment, you probably won't be able to collect your money right away. Unless the defendant agrees to pay you the full amount or you both agree to a payment plan, you may have to go back to court to get a lien on the person's property or have the court order a wage garnishment.
We're on your side
Meet with us for help deciding whether or not to take your particular case to small-claims court. Although you likely won't need us during the trial, we're here to advise and support you in whatever way you might require, giving you the best chance of collecting the money you're owed.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.