I often get calls from businesses and individuals looking to recover money owed them. Each time the question is the same: Should I sue?
The answer: It depends.
While each situation is unique, here are a few questions to consider when trying to decide whether to file a lawsuit.
- What is your ultimate goal? The obvious answer is to get your money back. However, few decisions are that simple. For one, there’s your image to consider. Suing everyone who owes you money can give you a bit of a tough reputation, thereby making customers more likely to pay you. However, that reputation may also drive potential customers away. Or maybe you’re in it for the justice. Many choose to sue because they don’t want people to get away with ripping them off and want to make sure it doesn’t happen to others. A noble goal, but a potentially costly one. You don’t want to let your pursuit of what you believe to be “justice” to interfere with the survival of your business.
- Who is the debtor? Is the debtor a one-time or long-time customer? If the former, you may be more inclined to sue to collect. However, if it is a long-time client, there may be better ways to resolve the dispute over payment that will be beneficial to both parties and allow your business relationship to remain intact. Another consideration related to the identity of the debtor is whether that debtor has any money or assets. If the customer has the means to pay but simply doesn’t, it might be worth it to sue. If, on the other hand, it’s a business in the process of shuttering, spending more money to sue them may just be a case of throwing good money after bad.
- How much money is owed? It’s true that money is money and the loss of any amount can hurt your bottom line, especially if you’re a small business. However, the unfortunate reality is that filing a lawsuit with the assistance of a lawyer can be expensive. In some instances, it is just better to cut your losses and move on. For those instances where a smaller amount (under $10,000) is owed and a lawsuit is needed, small claims court may be the way to go. There you can represent yourself or your business without the assistance of a lawyer. Additionally, the results are much quicker than a regular lawsuit.
- Can you recover attorney fees and costs? If you can recover your attorney fees and costs on top of any amounts you are owed, the question of how much is owed becomes less important. In Utah, generally you can only recover attorney fees and costs if there is a statute or a contract which provides for such an award. If you have a contract or a credit application with your customers, make sure it includes an attorney fees provision. That way if you have to sue, you can recover the costs of the litigation in addition to the debt owed to you.
- What is your timeframe? A lawsuit takes time. This can be hard to hear when money is involved, but for those willing to exercise a bit of patience the payoff can be well worth it.
- Are there other paths to resolution? Before jumping into a lawsuit, be sure you’ve reviewed all your options. Sometimes a demand letter from an attorney is enough to compel the debtor to pay. In other instances, mediation may assist the parties to come to a resolution.
In the end, no two cases are exactly alike. If you have a collection issue and would like to discuss whether a lawsuit is your best option, give me a call—I would be happy to talk with you regarding a specific case.