Do I Really Need A Lawyer To Collect Delinquent Accounts?
You have a small business. Like many businesses in the last few years, you have experienced an increasing percentage of accounts where your customers just won’t pay their bills. Some are deadbeats, and some simply cannot pay. You’d send the accounts to a collection lawyer, except many of them are just too small, after fees and expenses, not to mention the hassle. Instead, you simply write off those accounts as uncollectable.
There is another way. Many of our Virginia clients are surprised to learn that the small claims courts are an effective debt collection tool, and that you do not need a lawyer to represent you. When attempting to recover amounts up to $2500, privately-held companies can file suit without a lawyer, and a corporate officer can even go to trial without a lawyer in General District Court. Va. Code § 16.1-81.1 (for corporations of five or less shareholders, allowing an officer with unanimous shareholder consent to represent corporation).
If you choose to use the small claims court (a division of General District Court), companies can go to court without an attorney for amounts up to $5,000. Virginia law actually prohibits attorneys in small claims court for most purposes. Companies instead can have an owner, officer, general partner, or employee file and try the case. Va. Code § 16.1-122.4(A)(1). Many companies assign someone in the bookkeeping department to handle such matters. Of course, if you are the owner AND the bookkeeping department, you can do it yourself.
Assuming there is no real dispute the money is owed, you’ll get a judgment in your favor. A judgment alone is nothing more than a piece of paper – you still have to actually collect the money. Experienced collection lawyers have many tools at their disposal, including the right to issue subpoenas and debtor’s interrogatories. However, by far and away the most effective tool is one you can use yourself, without a lawyer: garnishment. If you have a judgment in your favor, you can request the clerk of court to issue a garnishment summons. If you know where the debtor banks, you can garnish his or her bank accounts. If you know where they work, you can garnish their wages. When a garnishment summons is served on a bank or an employer, they have no choice but to send the money to the clerk of court.
Send your bookkeeper to court one day (or go yourself). You’ll be surprised at how simple the process is, and you’ll learn by watching how to avoid some common mistakes about proving your case (even in small claims court, you have to actually have evidence to prove your claim).