In this economy, one of the most common problems faced by small business owners is getting paid by their contractors or customers. This article provides an overview of the process for recovery of money due and owing. If the dollar amounts are small (E.g. in Ohio if less than $3,000) it may be ok to do it yourself in Small Claims Court. On the other hand, if the amount is significant, it is usually a good idea to retain an attorney.
Once you have decided the court in which you are required to file, go to the clerk of court's website and download the complaint form and attach your unpaid invoices and correspondence with debtor as evidence of non-payment.
I can assure that in 99% of the cases, the debtor will not respond or make excuses. In that case, you have to determine the court in which you will file the lawsuit. The costs of filing and the legal costs of the suit depend on the court in which you file. For example, in Ohio, Small Claims court handles cases where the amount in dispute is less than $3,000, municipal courts handle cases where the amount in dispute is between $3,000 and $15,000 and common pleas courts handle cases where the amount in dispute exceed $15,000.
The Court will then issue a default judgment (if debtor does not make an appearance) or a judgment (if debtor appears and loses because he/she/it does not have a valid defense).
If the debtor has not paid you by the due date (plus any grace period), the first step is to send a letter requesting payment. Please be aware if you are sending this letter to an individual (or for consumer debt), the correspondence has to comply with the Fair Debt Collection Practices Act.
Now if the debtor does not pay the judgment within a reasonable time, you take it to the next step. If its an individual debtor, you can schedule what's known as a "judgment debtor" exam. This means that you file a paper requesting a 'judgment debtor" exam with the same court. The court will then order the debtor to appear in court under subpoena. If the debtor does not appear in court, the court will then issue an arrest warrant.
You may be surprised that the judgment is simply a step in the process. The Court orders the debtor to pay, it does not actually make the debtor pay the judgment. You have to use the order to force the debtor to pay.
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