Instead of more on vehicle liens, there seems to be a call for information about commercial collections. Commercial collections covers any unpaid bill of a business. There are different rules for commercial collections than the more stringent rules that apply to collections on consumer debt.
The collection of a debt is essentially an action based upon a contract. While written contracts are always preferred, it is possible to have a collections action based purely upon an oral contract. However, I always advise my clients to put agreements for goods and services in writing as there are too many pitfalls in oral contracts. Further, a written agreement can add terms such as interest and attorneys’ fees and costs incurred to collect the debt. These are not typically allowed with oral contracts. Thus, if your business is not using written invoices, or ones that don’t set out specific repayment terms, your business should have an attorney review your practice and he or she can set you up with invoices that pass legal muster allowing you to ask for all of your expenses in attempting to collect the debt.
Once you have established a debt that has not been paid, an attorney will typically send a demand letter to the debtor. A letter from an attorney carries more weight than a letter from the business owner. In my experience, this first step yields results 15 to 20 percent of the time. If the demand letter fails to achieve a full payment, a payment plan, or a partial payment settlement, your attorney will have to file a lawsuit.
The total amount of the debt owed will dictate where the case is filed. In general, anything more than $25,000 will be filed in Unlimited Jurisdiction. There is a hefty filing fee of $395 and there are few limitations on discovery (written and oral questions) that may served by the parties. If the amount is less than $25,000 but more than $10,000, then you would file in Limited Jurisdiction. The fee is slightly less at $370, but the savings come with the very limited discovery allowed. Between $5,000 and $10,000 the filing fee is $225 and the same Limited Jurisdiction rules apply regarding discovery. Less than $5,000 and the complaint should be filed in small claims. The fee is very low, only $30 to $50, but the parties are not allowed to have attorneys represent them. My earlier articles addressed Small Claims actions in great detail. More next month and, as always, if you have questions please feel free to contact me.
The Law Office of Matthew R. Rungaitis is located at 25329 Irving Lane in Stevenson Ranch. For more information, please call 661-259-0358 and email: rungaitis@sbcglobal.net.