Bad debt- yuck- not fun.
Inevitably, some people are not going to pay their bills. The best thing is to not allow them the opportunity to do that in your invoicing system by means of prepays or credit cards. However, bad debt happens.
I have tried chasing down bad debt in many ways. Collection calls- collection agency- small claims court- and most recently, a mechanic’s lien.
Small claims court never worked for me- I would have to go to the local court, pay $65, and they would sent a certified letter to the customers house. From here it could follow several different paths.
- Client ignores certified letter. If you choose, you can pay extra to send sheriff to try to deliver the document, but if he can’t get in touch with them, dead end.
- Client signs for letter, and at that point he is given a court date.
Route 1 is obviously a dead end. From option 2 there are a couple more ways it can go:
- Client shows up to court, you win case, and a judgement is issued for the debt. This client now officially owes you that said amount of money, but he does not necessarily have to pay.
- Client does not go to court, so you win by default. You now have a judgement that you can attempt to put a lien on their property.
So the small claims route has never worked for me. I usually end up at step 1 and waste more time and money.
Most recently, I have filed for a mechanic’s lien. Man, this is so much easier! $19, and I need nothing but a specially formatted letter saying that the said person owes a said amount of money. BOOM! lien is put on house.
Now, you have that client by the balls. If they try to sell or refinance their house, they have to either 1) pay the debt, or 2) go to court. You win. They HAVE to go to court or pay. With small claims, they can just ignore the judgement and never go to court.