Who Should Appear in Court?
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Small claims courts vary from state to state in terms of who can sue to collect unpaid bills. As listed in the state-by-state Appendix, some states:
- allow bill collectors (called "assignees") to use small claims court
- ban bill collectors, but let lawyers carry out much the same task by representing multiple creditors, or
- ban both bill collectors and lawyers, only allowing businesses to sue on their own behalf.
Even among the states where businesses can't hire third parties but must represent themselves to sue on bad debt claims, there are important differences. For example, a few states entirely prohibit corporations from suing in small claims court, while others make it difficult for unincorporated businesses to send anyone but an owner or partner to court. However, most states allow corporations to sue and make it reasonably easy for both incorporated and unincorporated businesses to designate a bookkeeper or other employee to handle court appearances. (See Chapter 7 for more on who can sue in small claims court.)
After first checking the summary of rules in the Appendix and on your state's website, contact your small claims court clerk and find out exactly what rules govern bill collection activities in your state. If you are a business, talk to other businesspeople (or business associations, such as the chamber of commerce) to learn practical strategies to cope with these rules. Also, if you are in a state where bill collectors or lawyers do small claims collection work, you will want to find out how much they charge and how efficient they are and then compare this information to the time and energy it would take for you to do it yourself. Because bill collectors and lawyers typically charge from 20%-50% of any money they collect, you may conclude that you want to do this work yourself.
In many states, a business owner does not have to personally appear in court but can send an employee. Where money is owed, a bookkeeper or financial manager is normally a good choice, because the person can testify that a valid contract existed and the defendant has not paid the promised amount. However, if the defendant shows up and defends on the basis that the goods or services were defective, delivered late, or otherwise not acceptable, the bookkeeper is likely to be at a serious disadvantage; he or she probably has no firsthand knowledge of anything except that the check was not in the mail. For example, if you own a graphics business and are suing on an unpaid bill in a situation where you expect the defendant to show up in court and falsely claim you did lousy work, you will need to have someone in court who knows the details of the particular job. Typically, this should be the employee who dealt with the customer and did the work.