When I ask small business owners how they plan to collect from their delinquent accounts, they often tell me that they plan to take their cases themselves to Small Claims Court. The process can be a great way to recover bad debt, if you take the time to learn how the system works.

Small claims court is designed so that business owners, as non-attorneys, can access the court directly.Many businesses sue delinquent customers themselves to save on debt collection fees, which is a great idea, but what many owners do not realize is that there is a significant investment in time, and business owners must decide if going to court makes sense.

Knowing I was going to write this blog, I recently visited a morning session of Connecticut Small Claims Court. I was there as an observer only, with no connection to any of the cases being heard. Here are some observations and recommendations:

1. Study the process. One gentleman was in court with the person he was suing, who has agreed he owed and had agreed to pay. However, he wanted the Court to collect the money. Courts award judgments, but do not collect the money for you. This is a common misconception. Make certain you read the manual (link  to Connecticut Courts here, every state has similar information) carefully and ask a clerk if you have questions. 

2. Choose the right partner – Just because you can go to small claims court on your own does not mean you have to go on your own. You can certainly hire an attorney to represent you, although you may still have to appear in court with your attorney to give testimony. I saw two attorneys who were complete opposites, one who did not have the correct forms and seemed not to understand the process at all, and another who was obviously used to large cases, who wanted to make the case more complicated than it needed to be. If you are going to use an attorney, make sure it is an attorney with experience in business debt collection. The attorney should be prepared to collect the judgment once it is granted to you. As always, we think the way to get the best results is to hire a collection agency that has a good relationship with a collection attorney, so that you will benefit from the expertise of both. A collection agency cannot represent you in court, but they can provide valuable assistance to you and the attorney with research and post-judgment collection.

3. Bring documentation – Even if documents have been previously submitted to the Court, bring contracts, invoices, all correspondence and any information you think might be relevant. If you don’t know what may be relevant, err on the side of caution and bring everything. I saw one case easily succeed because the business owner was prepared and understood his contract, and brought information to back up his claim. I saw another case where the defendant may have prevailed but did not because they did not bring information to support their defense. 

If you can avoid some key mistakes, The Small Claims Court can be a great tool for small business debt collection. But know what you are getting into!

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