In this week's Freedom Friday blog and email newsletter, we're continuing in the series Top 5 in 2025, and today's edition is probably the 2nd most popular article that I have out there right now, and that's how a small business can resolve non-payment issues, especially of its customers. I get a lot of inquiries about how to handle customers who don't pay their bills. If you've sent multiple invoices, followed up by phone and email, and you're still not paid, what else can you do. You can sue if you'd like, but sometimes that needs to be a last resort option. You should at least consult an attorney and take some intermediate steps before filing a lawsuit for non-payment. Suing for non-payment can be time-consuming and expensive. At Liberty Legal Solutions, LLC, I do represent small business owners for non-payment issues, but it's hourly work, and not contingency. There is no guarantee of recovery. In today's Freedom Friday blog and email newsletter, I'm answering the question, “How can a small business resolve non-payment issues?”
First of all, always consult a lawyer before filing any kind of lawsuit. You and your attorney need to come up with a strategy to resolve your non-payment issues. Here are three (3) steps which you should take and discuss with your attorney:
1. Send a Final Invoice
The first step you should take, especially before filing a lawsuit to resolve a non-payment issue, is to send a final invoice. The invoice should be sent with a demand letter, either from your business itself or your attorney, and it should include the fact that the customer has defaulted on the invoice or breached the contract (or both), the total amount owed, including any late fees and/or interest, ask for payment in full by a certain date, and inform the customer you intend to pursue legal action if the invoice is not paid in full by the deadline.
2. Decide if It's Worth a Lawsuit
The second step you should take, especially before filing a lawsuit to resolve a non-payment issue, is to decide if it's worth a lawsuit. If you don't receive payment after sending the final invoice and demand letter, then you need to make a business decision and figure out if it's worth the time and expense to sue your customer. You should consider the total amount owed, and also the financial state of your customer, because there is no guarantee of recovery, and if the customer decides to file bankruptcy or does not have the finances to pay you back, it may not be a worth a lawsuit, or you may want to consider selling the debt to a collection agency instead of filing a lawsuit.
3. Consider Small Claims or a Civil Lawsuit
The third step you should take, especially before filing a lawsuit to resolve a non-payment issue, is to consider small claims or a civil lawsuit. If you and your attorney decide to file a lawsuit, you need to decide if you will file your lawsuit in small claims court or file your lawsuit in district court. In Oklahoma, there are two different levels of small claims lawsuits, and the maximum amount you can file for is $10,000.00. You do not need to have a lawyer represent you in small claims, but if there are complex issues, you should have an attorney representing your business. Small claims court is the least expensive option, but even if the debt is for a moderate amount of money (between $5,000 and $10,000), it may be easier, although somewhat more expensive, to file your lawsuit in district court. A civil lawsuit in district court may be more time-consuming and/or expensive at first, but if you get a default judgment, you won't have to physically go to court like you would in a small claims case. You also MUST be represented by an attorney in district court. Lastly, the most common question I get is who pays for the attorney fees and costs. If you or your attorney file the lawsuit yourself, then you are responsible for the filing fees and whatever attorney fees that your attorney may charge you. However, if you get a judgment against your customer, the judgment will usually include attorney fees and costs, which you will need to collect from your customer, along with the amount owed, in post-judgment proceedings such as garnishments, and of course, there's no guarantee of recovery, especially with a default judgment.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at [email protected] to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/
Comments
There are no comments for this post. Be the first and Add your Comment below.
Leave a Comment