Even if you follow all of the advice we have given on how to collect a bad debt, it is inevitable that some of your accounts will end up in court. This should only be used once all other options have been exhausted as it is both a time consuming and costly process. Yet, in some cases, you will find that it makes sense to continue with a legal action against your customer. Here is a broad overview of what you can expect and how the process works.
Summons and Complaint
Once you decide to file a suit, you will then provide your attorney with all the required advancements and documentation needed. This will mainly include the amount due, as well as lay out the basis of your case. After this, a process server or local sheriff will serve your customer with the official Summons and Complaint. Once your customer has been served, they will have anywhere from 20-45 days to file a response depending on the state.
Three Possible Outcomes
Once the summons has been served, three possible scenarios could happen. If your customer fails to respond within the designated time frame, your attorney will most likely enter a motion for a default judgment. This means that the court will basically render a judgment in your favor without any input from your customer. Your customer will again have 2-3 weeks to dispute this judgment, but after that, they will have to abide by whatever was decided.
The second type of scenario would be if your customer responds with a general denial of the claim but without disputing any of the facts. In this case, your attorney will most likely enter a motion for a summary judgment. This means that the court will decide the case based on the evidence presented in the documents submitted to the court. Assuming the documents you submitted showed a good amount of evidence in your favor, the court will likely rule in your favor given that your customer failed to dispute your claim or show any evidence to the contrary.
The final, and most complicated, possibility would be if your customer files an answer to the lawsuit that attempts to dispute any of the claims you have made and present their own evidence to support this position. This will most likely mean you will end up having a trial in order to settle the matter.
Going To Trial
We will not go too in-depth into how a trial works, as this will be handled largely by your attorney, but if a trial is necessary you should know a few things. For starters, it is possible that a judgment could be rendered that not only dismisses your claim but also holds you responsible for legal cost or other damages. In the case that your claim is found to be valid and a judgment is rendered in your favor, you should not expect to be paid that very second. Getting your customer to pay, even with a legal ruling, can take time and does not always guarantee payment. If your customer doesn’t pay within a specified time (usually 20-30 days), you may proceed with a Writ of Execution. This allows a local sheriff to arrange payment of the judgment by assessing the debtor’s assets and determine if it would be possible to collect the money owed. Once the sheriff has finished their assessment (usually up to 90 days), you then have the right to subpoena the principal owner of your customer’s company in order to question him a supplementary proceeding called a judgment debtor exam. This will allow you to attempt to find any assets that the sheriff was unable to uncover.
Once these final proceedings have occurred, you will be able to extract payment from any assets that were uncovered. In the case that no assets were found, then, unfortunately, getting paid will be very hard and often not worth the effort, though we would suggest following the advice of your attorney in this case.
It is important to note that these timelines can vary by states but the overall structure should remain the same. As always, this post is not intended to serve as legal advice and if you have any specific questions we would suggest you seek the advice of an attorney.