When Should A Business Hire An Attorney For Commercial Collections?

I have been handling commercial collections for over 20 years. Getting the judgment is usually the easy part.  Collections are a whole other matter.

Commercial collections have gotten quite a bit more difficult lately with debtor business failing or filing bankruptcy and courts not willing to grant things, such as Receiverships, as much to assist with collections on judgments.

Firms like ours have to look at much more closely at which files we would be willing to handle on a contingency fee basis. That also means that our clients have to look much more closely at which files they would be willing to pay an attorney on a straight time basis to pursue.

I have been encouraging our clients to look at the amount of the claim.  If it is under $10,000, they may consider handling it themselves in Small Claims Court if collection is questionable.

While the court may grant attorney’s fees as part of the judgment if you are represented by an attorney, if the debt is uncollectible, then you won’t be able to recover your expenses and costs.  Also, judges often cut the attorney’s fees awarded in a judgment so that the other side has “gotten something”, and is less likely to appeal the case.  In other words, if you get a judgment, it may not cover the full amount of attorney’s fees that you actually paid your attorney.

If the case is not very strong, or there may be a defense or counterclaim filed, then litigation could get expensive.  However, an attorney is more likely to better prosecute your case or defense if it is more complicated.

Also, if the case is filed in Justice Court, rather than Small Claims Court (even though it is the same Judge on the bench), then the Rules of Evidence and Procedure apply, just like in County and District Court. You are at a distinct disadvantage in Justice Court if you are not represented by an attorney, even though the law now allows corporations to represent themselves in Justice Court without an attorney.

Basically, you need to look at how collectible the debt is likely to be.  If it is a fairly straight forward case and very collectible, it may be something that could be handled on a contingency fee basis. If the debt is under $10,000, you have the option of handling it yourself in Small Claims Court.  If you do not have the time or desire to handle it, the obligation owed is over $10,000, or it may be complex, involve a defense or counterclaim, then you need to weigh if it would be worth hiring an attorney on a straight time basis.

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