What to do when you don’t get paid

Website design By BotEap.comAlmost all businesses have collection problems from time to time; For some businesses, the collection of overdue invoices is the most important problem. Usually, when a customer calls me about billing, they’ve already run the gamut of ordinary billing techniques: monthly billing, reminder billing, reminder letters, warning letters, phone calls, email, etc. Often, they have already received multiple promises of payment and have been disappointed. As a result, I generally don’t bother much with ‘attorney letters’ for collection – if the non-paying client were going to respond to a sternly worded letter, they would have already done so.

Website design By BotEap.comThe comments that follow are oriented around the commercial collection of important unpaid invoices. Specialty collection agencies and law firms deal with the problems inherent in collecting small sums of money from many clients at the consumer level. In Pennsylvania, you can use the district court procedures described below to collect a small bill on your own, but consider whether the time and cost involved are justified. Almost every state has a court where procedures are simplified, and the court is designed to allow non-lawyers to bring lawsuits for less than the jurisdictional limit.

Website design By BotEap.comBefore we talk about getting a civil judgment for money owed, it’s helpful to review some (perhaps obvious) basics. There is no debtor’s prison in the United States. If someone owes you money, they are generally not breaking any criminal laws. The police will not arrest them or make them pay, even after getting a judgment. Generally (although clients often tell me otherwise), a broken promise to make a payment is not “fraud” in the legal sense. So what is a civil lawsuit for money for? What is the point? A money judgment is actually the right to send a bailiff or sheriff to seize (take legal possession of) the debtor’s assets, up to the value of the judgment. Some logical consequences follow from this precept: if the debtor does not have assets, he may be wasting his time. Often, judgments must be transferred to the county or state (depending on state legal standards) where the assets are located. Assets include bank accounts, real estate (good, because you can’t run or hide), valuable machinery or equipment, and third-party money that is owed to the debtor but is still in the hands of a third party. When you’re looking to collect money from a judgment, what you want is the value of the asset: the judgment is the means to tell the sheriff to seize (levy or “freeze”) that asset and set a limit on how much you can attach Seize the account A debtor’s checking can have a catastrophic effect (checks start to bounce, with added bank charges), so even if the amount of money in the account is less than your judgment, the very painful and panic-filled phone call you Freezing a checking account is often followed by full payment.

Website design By BotEap.comIn Pennsylvania, once a judgment is filed with the prothonotary (civil clerk) of the Court of Common Pleas for a particular county, the judgment also acts as a lien on all real property held by the debtor in that county. In big money lawsuits, lien priority can become important (first in time, first in law is the rule) because judgment liens, like second mortgages, are paid off with a foreclosure if there are enough of them. proceeds from the sheriff’s sale, but not otherwise – and the purchase money mortgage lender always comes first.

Website design By BotEap.comSo how do you get a trial? If the amount you are seeking is $8,000 or less, then you may go to a local district justice court. The good news is that filing fees are low, typically less than $150 and recoverable in a favorable judgment; fill out a simple form to start the claim; you can proceed without a lawyer (a corporation must be represented by one of its officers); no pretrial discovery procedures, which generate legal fees; judgments by default (without response from the defendant) are common; the case is usually heard within a few weeks or months (although postponements are common and can be frustrating); and most district judges take a fairly liberal view on the rules of evidence and procedure, to allow parties to present their cases even without knowing the applicable legal rules. Convince the district judge and you will get a sentence, within a few days after the hearing, up to the jurisdictional limit of the court.

Website design By BotEap.comThe procedures with district court for money debt difficulties are: you do not know what defense the other party will make, if any, before the hearing; the rules of the hearing are just as liberal for the other side and the outcome of district court proceedings is often unpredictable; there is no explanation of why the sentence is what it is – justice simply issues a form that awards money or not; the losing party can appeal their favorable judgment from the district judge with little difficulty and cost to the County Court of Common Pleas, which means they have to start over in a forum where they need a lawyer to navigate the complex legal rules of the civil procedure; the district judge’s judgment is not a registration judgment binding real property unless you wait thirty days for the appeal period to elapse and then transfer the judgment to the Court of Common Pleas; can only foreclose on (garnish) the tangible personal property of the debtor – cannot garnish bank accounts or other property held by others (called a garnishment) pursuant to a district court judgment.

Website design By BotEap.comIf the thirty-day appeal period has elapsed, you can transfer a district judge’s judgment to the Court of Common Pleas by paying a small fee and obtaining a certified copy of the judgment, although there are some rules about filing judgments in Court. of common reasons you may need help with. After that, you have all the various techniques available to you, including garnishment, to collect a judgment. Somewhere along this path described above, if they have the means, defendants often tire of the ‘dance’ of litigation and arrange to pay the bill. If they pay the bill, you take steps to prove that the judgment was satisfied.

Website design By BotEap.comIf the amount is more than $8,000, or the district judge’s decision is appealed, or you simply decided to skip the district judge’s step altogether, you can file a complaint in the Court of Common Pleas. Although you can try to proceed pro se (without an attorney), it is very difficult to do so successfully: the Pennsylvania Rules of Civil Procedure and local county practices (each county has its own set of local rules) are too complex. Additionally, legal entities such as corporations and limited liability companies must proceed through a licensed attorney in a civil lawsuit for money at the Common Pleas level in Pennsylvania.

Website design By BotEap.comAny complaint takes a lot of time to write up, file with the clerk, and notify the debtor through the bailiff, which means legal expenses for you – the amount of the unpaid bill should make it worth it. On the other hand, a lawsuit requires a response on a specific schedule, in a very specific format (the defendant has twenty days to respond after the sheriff’s notice and receives a warning letter ten days later). If no response is filed after the ten-day letter time period has elapsed, we enter a default judgment and can begin the asset search. In my experience, when there is no actual dispute over the services or goods provided, just an unwillingness or inability to pay, default judgments are common. Often, around the time a response is due, we get a call from the debtor’s attorney, who is looking to suspend litigation, negotiate a payment schedule, and possibly request some concessions in terms of payment terms, refunds, or credits. for some disputed items. etc. It usually makes sense to give some concessions in order to get paid and wrap things up. In one case, after going through the entire process and transferring the resulting judgment to another state for enforcement, where we seized a bank account (and hired a local attorney to help), my client collected the money owed to him (although with some losses due to legal costs). Some time later, my client and the debtor went into business together again, but my client demanded and obtained full payment in advance, and the relationship has worked ever since.

Website design By BotEap.comA bankruptcy petition stops the collection process altogether, pending bankruptcy proceedings. Contractors who are owed money for work done on homes or buildings often have mechanic’s liens in addition to the more common steps available to any creditor. Mechanics’ lien law has changed recently in Pennsylvania a bit for the better, especially for subcontractors, but mechanics’ lien law can be complex in terms of proper notice, timing, and filing of the lien.

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