Debt collection and small claims court should be a natural fit. Sometimes they are. However, it can also turn out to be a huge waste of time and money. So how do you learn how to use the courts effectively, or how to you decide that you need a different approach? Here are some key factors to consider:

Time and Cost – Getting a case ready to go to court takes time. You will likely have to appear in court, at least once. After you receive a judgment, you will still have to collect the money. Decide how much time you want to spend on a file.

I was in a Maine Small Claims courtroom recently. A local plumber was there with a half dozen cases on the docket. Many of the cases were under $500.00. I did not speak with him, but I am sure that he made the decision that bringing 6 cases to court was a good use of his time. It can take a few hours or most of the day to go to court, so he had to decide that the loss of that time working on plumbing was worth it. I have to wonder though, as I have seen a plumber’s hourly rate these days! If the defendants showed up and paid that day, perhaps it would be financially feasible. However, many small claims judgments are won by default, which means the defendant does not show and loses the case (that is, the case is decided in your favor). In the case of a default judgment, our plumber would have to spend more time working to collect the judgment. Small Claims judgment collection could mean more time and expense.

Let’s do the math. It costs $ 55.00 to file a small claims suit for $500.00 in Maine. The cost is for filing only: there may be additional costs of certified mail or hiring a sheriff to serve the law suit. The average hourly rate for a residential plumber in Portland, Maine is 85.48. If we assume that two hours for attending a small claims hearing, a conservative estimate, we have “spent” $ 170.00 in time that would have been billed for plumbing. Add court costs and you are nearly at half the value of the debt you are seeking to recover, without taking into account additional costs and time spent collecting the judgment.

The plumber in this story. I can only assume, believed that bringing a number of cases to court made sense. Consider time and cost before proceeding. Also, what rate your collection agency charge to do the same thing?

Expertise – If you win a small claims suit and you know exactly where your customer works or banks, then it likely makes sense to do it on your own. However, estimates are that as many as 75% of judgments go uncollected for a variety of reasons. Make sure you know where the assets are and how to get them.

Case in point: A client asked me to collect a $2,000 judgment. Their lawyer had obtained the judgment and they thought, had put a lien on the customer’s home. However, when I took the file over, I checked and saw that the attorney had indeed put a lien on any property owned in York County, Maine. In Maine, a judgment lien, or Writ of Execution is filed by county. It took me 5 minutes to find out that the customer’s home was in Androscoggin County, making the attorney’s lien essentially worthless.

Make certain that you, or whoever you are using, knows what they are doing. If you use an attorney, make sure they are experienced in debt collection – both the court process and post judgment recovery.

The bottom line is that there is almost always a way to get paid, but no one approach is the right one all the time. Do what makes sense and will help recover money owed to you.