There has been much debate in our client’s internal organizations in respect to a very serious issue.
Should we sue the file in small claims or write off the unpaid invoice and forget it ever existed?
Either you’re a small to medium business or an individual that has someone else owing you money – you may be asking yourself the very same question.
Fortunately, you are not alone and we’ve got some helpful points to share with you on whether your particular case is worth a visit to the courts or not.
First off, we need to review the minimum requirements that are set by the courts or MUST be set by you as the creditor in the action.
1. Is the unpaid amount worth going into small claims or should we proceed directly into Supreme Court?
2. Is there a contractual agreement, tenancy agreement, or any other proof on paper that has been signed by the debtor?
3. Is there a specific asset we are going after?
Now that we’ve got that down lets make this a little more complicated without messing with your head too much.
Our next step is to analyze the complete case with an unbiased mind.
Could there be a valid reason why the debtor is avoiding to pay the invoice.?
In other words, is there a chance of a dispute?
Maybe you did work for an individual and during the collection call, the debtor seems to repeat how the contracting work was not completed properly. I can understand that this is something collection officers must keep an ear open for, but as the main claimant in this case it’s important that you also keep yourself aware that disputes DO Happen. And if they do, are you ready to take this into court regardless or resolve it peacefully out of court?
Resolving cases like these out of court would possibly be the best option.
Now let’s say we’ve passed that point and there are no possible disputes you could think of. Now we must research and determine whether we even have assets to collect this account on a legal basis.
For example, is it worth suing if the debtor company has been out of business for the last six months with inactive bank accounts? Probably not.But if this same closed down business has property, then it’s probably a good idea to sue the file and get a lien on the property ASAP.
Here’s another scenario for you to think about. An individual debtor owes a large organization over $10,000 in debt. Has a beat up car with no means of income but has a bank account with $6,000 sitting in it. You decide to sue the file so you could “garnish” the bank account. Bad idea. What is the guarantee that the $6,000 will still be sitting there after you’ve finally been granted judgment, after lets say 2 weeks? And if those funds are gone what other action will you take on this individual?
Now lets tweek this scenario a little bit. Let’s say this individual has no assets and no good funds in their bank account. But has a permanent job and it’s been confirmed.
Sue the file and garnish the wages at 33.33% per garnishee and let it take however long it has to be paid in full. In these cases, sometimes the debtor will finally stand up and make an offer, or the payroll administrator will ask you to stop issuing new garnishees as they will be kind enough to automatically garnish 33.33% for you per pay-date.
I know this is a very complicated topic but I have tried to simplify it in the best way possible.
But do take a few points home with you today.
There is a lot to think about before throwing a case into Small Claims.
Please do NOT just assess the minimum requirements before placing your claim. A lot of collection agencies will proceed with such cases without fully analyzing your case on paper. This causes high expenditure and a lot of time spent on meaningless court dates without getting any monetary reward in return.
The best thought out cases do very well and the least thought out cases end terribly.
But don’t take my word for it. I’m just a collection agency!
Tipping my hat,
M.S. Debt Recovery & Solutions Inc.
200-4170 Still Creek Dr
Burnaby, BC V5C 6C6