Lawyers, small business people: how to collect on a bad debt?

Factual Questions
1

For the first time in ten years as a small businessman, I have a customer who is refusing to pay for services rendered. A total of about $1,200 is now six months overdue.

So far, I have only sent the usual invoices and statements. I intend to call the head of the company and talk with him, but he’s apparently mad about something I did and I don’t expect a calm conversation with a satisfactory conclusion. I will do my best to remain calm, of course. (BTW, the “something I did” in no way absolves him of the debt.)

Here’s a twist that will probably make everything more complicated: I’m in Maryland, USA, and the debtor is in Quebec, Canada.

So what are my options, assuming that he simply refuses to pay?

Don’t bother suggesting small claims court. I’m not sure that they can be used across international borders, but even if they could, this same person was recently declared in default on a multi-million-dollar lawsuit filed in U.S. Federal Court. He simply refused to cooperate with the discovery process. So I don’t think he’s going to pay the slightest attention to a small claims court.

The only other options I can think of are writing off the debt or turning it over to a collection agency. If I want to do the latter, how do I go about it? How do I select an agency? What will they require from me to prove that the debt is legitimate? How does the process work: do they give me a check for a percentage and then go off and do their best to collect, or do I get nothing until they squeeze some money out of them? What issues are created by the international nature of this case?

Do I have other options?

Thanks.

2

As for picking an agency, the best I can offer is that you call up other business you deal with and ask them for a reference.
What will the need…signed invoices preferably, or a signed contract if they signed a credit application, the agency will want that as well. Basically anything that says that they would pay you money for services rendered.
After that, it’s out of your hands. They’ll collect the money and give you what’s left after they take out their portion. You’ll probably receive about 70% of the original debt. They may take more if it goes to court.
I could tell you more, but it’s been a while since I’ve done this, so my facts may be off. I would call up a collection agency and ask them your questions.

3

Actually, you can collect a small claims court judgment even if he isn’t paying any attention. Easier, even, than a US Federal Court judgment.

Once you win a judgment, you can force collection. The local authorities (Sheriff in the USA) will do the collection, but you have to show them where he has seizable assets. If you can do that, they will do the collection for you.

For example, years ago I won a small claims court case against a parking lot operator in small claims court I had a friend whose office overlooked the lot, who had informed me that the bank messenger came by every morning about 10:30 to collect the day’s cash. After I had the judgment order, the Sheriff’s office told me to wait 30 days (giving them a chance to pay), then come by and make arrangements. They would send a deputy to go by the lot office at 10:15 with the judgment order, seize the bank deposit, extract cash equal to my judgment amount, and deliver that to me. Th objections of the parking lot people wouldn’t matter, since I had the court-ordered judgment. (I didn’t have to actually do this; they paid the judgment.)

But first you would have to win your case in small claims court. You’d probably have to travel to Quebec to file the case, and again to appear in court. (You win by default if he doesn’t show up, generally.) I have no idea if a Quebec small claims court will take a cross-border case (where was the debt contracted – in Quebec or in your state?), and the travel expenses may make this out of reach. Still, it might be a way to get a trip to Quebec (tax-deductible, even).

4

I am neither a lawyer or a small business person, but I have spent half my life as a collections manager.

At this stage, you have to make a business decision, from a purely analytical standpoint.

He owes you $1200.00, and that is not in dispute.
He is refusing to pay you because he feels you have done something wrong.

First, talk to him (as you said you would). Offer a compromise, see if you can get partial payment. Be conciliatory, even if it chokes you.

If you cannot come to a mutal agreement, you have several courses of action.

  1. Bluff, a bit, within the bounds of Fair Debt law. Send him a letter stating you’re sorry you couldn’t come to a conclusion, and that you’re considering (don’t threaten!) taking further action, would he please reconsider.

  2. Get a professional agency to collect for you. They work in two ways - one is that you pay them a fee and then if they are able to collect, you get 100% of what they get. The other way is they take your debt, collect what they can, and you get X% of that (usually 50-80%), depending on the staleness of the debt.

  3. Get a Canadian solicitor or an American lawyer to write a very offical letter.

But honestly? How big a debt is this in terms of your business, because you’re going to have to put $1200 and more of time, effort and energy into getting the debt, and frankly I believe your chances of forced collection are low - I’ve been in this situation before.

If it were a US client in the same state, I’d say push it to the max. In this instance, I might just write it off if I couldn’t get the client to settle for a lower amount.

Cheers,
G

ETA: There may be some tax compensation in writing it off, too - consult your accountant.

5

Thanks, all, for the advice. In the long run, $1,200 is not going to break me, but I’d rather have all or some of it, if possible, without too much hassle. It was exactly how much hassle I’d have to expect that I was wondering about.

FYI, he’s refusing to pay for advertising in my publication, and he’s mad because I published a strictly factual news story about the lawsuit I mentioned in the OP. The court documents cast him in a pretty unfavorable light. But I did give him an opportunity to comment, and quoted his response in the article.

So 1) the debt is entirely unrelated to the reason he’s mad, and 2) even if he feels I “wronged” him, I did nothing wrong. I did my job as a journalist. (And yes, I knew when I published the story that he was very likely to retaliate by refusing to pay this debt.)

I’ve sent an e-mail to my accountant, and I’ll e-mail my lawyer, too. Thanks again for the advice, and if anyone else has any more, please feel free.

6

Has he paid you for your services on previous occasions? If so, do you still have the check or a copy of the check? It’s very handy to have his bank account number after you have a judgment against him and it’s time to collect. Your attorney can help you do what you need to do to freeze his account.

7

What Gleena said.

8

Ooh, good one! I’ll bet I do somewhere. Thanks.

9

Getting a judgment can be easy; collecting can be hard. I think Gleena gave you some good advice.

I remember reading about the Soviet Embassy stiffing a NYC printing company for the pamphlets and brochures the firm did for the USSR pavillion at the 1964 World’s Fair (IIRC). After the printer got a judgment and the Soviets still blew him off, he got a lien on the next Soviet cargo ship to come into port. When the printer walked aboard with a U.S. marshal and an impoundment order in hand, the Russkies paid the judgment fast. :smiley:

10

Your main problem here is the cross-border issue. Again, IANAL, and I am open to be corrected, but even if you successfully get a judgement then good luck collecting on it. Having his bank account number as mentioned is dandy, but you would need to get an order in the appropriate court to use it. And that court, in my experience, would have problems enforcing an order in another country, if they can issue it at all.

I hate to be the voice of doom (DOOOOOOOM!) but I really, honestly think your best bet is to speak to the man, be conciliatory (even at the expense of your pride) and try to negotiate a settlement. Something is still more than nothing. If it were me, I’d offer to split the difference.

Additionally, he paid for advertising in your publication. My argument would be (from a devil’s advocate perspective) that even if you wrote even a factual story that made his company look bad, then that advertising would be essentially worthless. You mention a company is in a lawsuit on page one, then advertise for them on page 10? Sorry, that’s just not a good look, I’m afraid.

Look, emotions run high in these cases. I’m willing to believe you are 100% right and he is 100% wrong, and a jerk besides. But take this into consideration - how much is your time worth? Even if you get a sucessful judgement, even if you get it enforced, with court costs, how much time will you have spent collecting $1200? Because you will easily spend 100 hours on this before it is done, plus postage, milage, etc. If you get a judgement, this will not be taken into account, because - sorry - $1200 is pocket change in the collections business. You’d get $1200 plus minimal interest plus court costs.

Try to get a mutually agreeable settlement, or let it go. At most, get a professional agency. You’re a bit too close to the situation, IMO.

/voice of DOOOOOM

Cheers,
G

11

Sorry, I ran out of edit time…

Since nobody has addressed some of your questions in the OP, I will say that a professional agency will require proof of debt - copies of invoices and a contract for services will be sufficent. Anything signed by the debtor is particularly good.

I would select an agency in this case based on size, and possibly whether or not they are international - and there should be some that are in both the US and Canada - Dunn and Bradstreet come to mind.

The agency will be hampered by the same conditions you will, and they may refuse it for that reason - cross border, small debt.

Honestly and sincerely though, no sarcasm intended, good luck! If you do manage to collect let me know how you did it, I’d be interested!

Cheers,
G

12

I would let it go. If you sue the guy, you run the risk of a BS counterclaim. What if he claims that you made certain oral promises to him that you reneged on? Then you have a big headache.

Same thing if you hire a Canadian collection agency. What if he sues you under the Canadian version of the FDCPA (is there such a law there? who knows.)

Most small businesmen and businesswomen would be ecstatic to have only $1200 in bad receivables.

13

and

To chime in, working in PR I absolutely HATE to see attitudes like this. Much as it is a fact of life, advertising and editorial should absolutley never influence one another.

I have a strong relationship with many reporters in my area, and part of the reason for this is that I never ask for anything other than an honest story. Period.

To Brazil84, if there is a signed contract (as there normally is for advertising) then the “oral agreements” should not enter into it, except of the sort that I wouldn’t like to try to explain to a judge. Along the lines of “if I advertise thou shalt not print a negative story” - which while IANAL smack to me of all sorts of shadiness.

Commasense - I wonder if you could pursue some sort of punitive damages from him purley on the basis that he is trying to “control” the news? While I don’t think you would actually receive anything from this course of action it would be very satisfying to see these sorts of idiots get their comeuppance.

14

Oh, I don’t disagree with you, from that standpoint. If it’s a publication that has as it’s primary purpose to report the news, then it should do. I was simply giving what I assume the debtor’s counterargument would be. You are absolutely right, an advertiser should never have editorial control of a publication.

My point was pragmatic. If it was a US debtor my take on it would be sue, and let the chips fall where they may. A signed contract and proof of attempt to collect would be sufficent to get the judgement, then you collect by whatever legal means are available. commasense can still do that, but at what personal, professional and monetary cost? And with a cross border judgement, my experience is that $1200 isn’t worth it. If it were $120,000, go for your life, you know?

I’m a bit of a cynic when it comes to collecting money. Get what you can and get out, before the cost of carrying the debt becomes more than the debt is worth.

Cheers,
G

15

I used to do Accounts Receivable. I have collected a lot of money over the years. Call and let the person tell you “why they aren’t paying you”. Be very polite and acknowledge what they say. Don’t respond to what they say per se, unless you absolutely have to.

Then ask for the money. You may get it. I once collected a bad debt that had been written off.

I would just write it off, if you can’t collect it. Small claims court is probably going to cost you more in time and aggravation.

If you can’t collect, never do business with this company again. If you can collect, always get paid up front.

16

Not sure how you’d negotiate that way, really. He knows why they aren’t paying him, per the OP and subsequent comments. In a negotiated settlement, you should respond, and you should state what percentage you’re willing to accept to clear the debt.

Just the once? :smiley:

Cheers,
G

17

Maybe they shouldn’t, but the fact is that people can always make stuff up. Even if you win in the end, the other side has accomplished the goal of causing problems for you. It’s just not worth the risk for the kind of money involved.

Yeesh. That’s just the sort of attitude that is likely to lead to a lot of lost hours, aggravation, and lost money – far more than the whole mess is worth.