Small Claims Court and Business Disputes
Resolve disputes and collect debts in small claims court -- without a lawyer.
Because small claims court dollar limits are rising, small claims court is an increasingly attractive arena in which to resolve business disputes quickly and cheaply.
The very people that business owners rely upon -- their subcontractors, suppliers, and customers -- can also be the source of all kinds of disputes. Subcontractors may leave work unfinished, suppliers may deliver subpar goods, and customers may not pay their bills.
Business owners typically can use small claims court in two main ways: to collect overdue bills or to resolve disputes with customers or other businesses.
Collecting Bills in Small Claims Court
Small claims court is particularly cost-effective for collecting unpaid bills because it eliminates the need for bill collectors and lawyers -- who often keep, as their fee, up to half of what they collect. Indeed, small claims court works so well that in many courts over 60% of the cases are filed by businesses. Because a substantial percentage of these claims are uncontested by the defendant (they know they owe the money and don't show up), little preparation or court time is needed. And best of all, many defendants who don't want their credit rating damaged pay voluntarily -- sometime between the time they receive a final demand letter threatening a small claims suit and the date a court judgment is entered.
You must have hard evidence that a debt is owed; small claims court is not biased in favor of allowing small businesses to collect debts. When defendants believe they have a good defense and fight back, they have a decent chance of winning or at least of paying substantially less than the plaintiff claims. For example, in a study of 996 small claims cases that went to trial, the National Center for State Courts found that 20% of the time the defendant won outright. In another 20% of the cases, the defendant was ordered to pay substantially less than the plaintiff demanded.
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