Small Claims Courts Are Closed. How to Get Paid Anyway

Posted by Marilyn Miller on June 01, 2020  /   Posted in Uncategorized

Courts in Maine and in many states continue to be closed due to Covid-19.  When they reopen, there will be a tremendous backlog.

If you have been using Small Claims Court to sue customers who owe you money, you will have to wait months to even begin the process. And remember, the Court simply awards a judgment that you have to collect yourself, which will mean even more delay.

The good news is that there are alternatives to Small Claims Court.

Settlement: If your customer admits to owing you but does not have the funds the entire balance, consider settling for a smaller amount. We recommend lump sum settlements whenever possible to avoid a drawn out string of payments.  A small discount can save time and infuse cash into your business.

Payment Plans: If cash flow is an issue for your customer, they will not be able to pay in a lump sum and a well structured and documented payment plan can be a good option. Require a deposit to begin the plan. Make sure the plan is in writing and signed by the customer.

Promissory Note: Perhaps your customer is going through a rough patch but is certain to have funds to pay you in the future. A promissory note is a written promise to pay you on a certain date. The note must be specific in terms of the amount of payment, method, date, finance charges and so forth.

Set up an in-house collection agency: You will be amazed how much money you will be able to bring in if you set up a system and use it consistently. Draft a series of collection letters of increasing urgency. Provide your staff with scripts for collection calls. Meet weekly to review progress.

Hire a collection agency. Find a collection agency that has experience working in your area and with businesses like yours.  Make sure the agency is compliant with state licensing requirements (if they exist) and check references. Provide a collection agency all information regarding the debt and the delinquent customer. Keep in touch with the agency during the process.

Not every debt or every customer is right for a Small Claims Action. Even after the Courts reopen, you may find these are better alternatives much of the time. The best way to get the Small Claims Court right is to realize that is only one tool in the debt collection toolbox. Have a strategy that includes a solid in-house collection effort, a relationship with a debt collection agency and a working knowledge of the  Small Claims Courts, and success is guaranteed.

 

 

 

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