No, not always. Prior to filing a lawsuit, counsel should review collectability issues and the facts of the case with their client, including contracts, invoices, and any documentation pertaining to the debtor. In some cases, the debtor will be considering a countersuit; if it seems like a countersuit is possible and may have merit and is for a substantial sum of money, then it might be advisable not to pursue collection. However, if a possible countersuit lacks merit (and they generally do), and the balance appears collectible and can be supported in court, then it usually makes sense to proceed.
It’s best to tell the attorney everything at the beginning of the process so they have all of the facts. We have been doing this for 30 years, and unfortunately, a few clients fail to tell us everything, which makes it difficult for us to provide them with proper advice. For example, if the debtor has a legitimate counterclaim involving proof of a defective product, we would need to know that in order to help our client navigate the situation in the best way possible. The decision of whether a client should proceed with collection efforts is made on a case-by-case basis.
What Out-Of-Pocket Costs Will Be Incurred While Our Business Is Attempting To Collect A Judgment And How Will They Be Paid?
Out-of-pocket costs once a decision is made to file a lawsuit are usually small in collection cases and generally involve court filing fees of less than $1,000 and service of process fees of less than $200. If the debtor doesn’t pay before a judgment is entered, we will enlist the services of a sheriff or levying officer to do a bank levy, accounts receivable levy, wage garnishment or other form of judgment enforcement. The levying officer’s fees should be less than $500. Therefore, total out-of-pocket costs might be as high as $1,500 but could be as low as $300 if we get a quick settlement.
Can We Ever Increase The Amount In A Judgment?
Judgments in California bear interest at 10 percent per year. For example, a judgment that was $25,000 when it was entered in 2009 rose to over $50,000 in 2019 with just the accrual of interest. Additionally, if the underlying judgment provides for attorney fees, then those fees can be recovered. It’s important to note that in order to recover attorney’s fees, we usually include a provision in the contract which states that if there is a dispute or a litigation filed to enforce its terms, the prevailing party will be able to recover their attorney’s fees. In California and most of the U.S., a client won’t be able to recover attorney fees unless there is such a contractual provision.
How Public Will Our Judgment Collection Be? Can Your Firm Discretely Recover The Debt Owed To Our Business Without Making It Public?
As a general rule, lawsuits are public under California law. Most of our clients don’t really care about this if they have not been paid for a debt that’s owed to them and there’s nothing embarrassing about filing a lawsuit in such a situation. We think it’s more embarrassing to the party that owes the debt. However, if a client is concerned about going public, we will recommend arbitration, which is a private process. However, the only way to compel arbitration is by having an arbitration provision in the client’s contract with the debtor. Pre-lawsuit and pre-arbitration communications (e.g. letters, phone calls with the debtors, etc.) are private unless the debtor chooses to make them public. Oftentimes, we can resolve these cases without having to file a lawsuit.
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