Question:
We are owed money from a firm for which we did some work more than a year
ago. The firm was having financial troubles, so we wrote up a contract
that refinanced the amount they owed. They made one or two payments on the
contract, but have not made any payments now for more than 9 months.
We can think of a few choices:
1) Sell the contract to a collection agency. Does anyone have any
experience with this? What types of contracts will they buy, and for how
much on the $$.
2) Sue them in small claims court (the amount is about $10K).
Any hints on your experiences with this type of problem would be
appreciated.
Answer:
Q: We are owed money from a firm for which we did some work more than a year
ago. The firm was having financial troubles, so we wrote up a contract
that refinanced the amount they owed. They made one or two payments on the
contract, but have not made any payments now for more than 9 months.
We can think of a few choices:
1) Sell the contract to a collection agency. Does anyone have any
experience with this? What types of contracts will they buy, and for how
much on the $$.
A: No personal experience here. From what I hear, it can run 30% to 50%.
Q: 2) Sue them in small claims court (the amount is about $10K).
A: Check on the limit in small claims court. Last I heard, here in
Californai, the limit was $5k. You could sue in small claims for $5k and
write off the remainder. If you want to go after the whole amount, you
may have to hire a lawyer and take it to Superior Court. That would
probably only net you $5k if you win *and* they pay.
A third option would be to explore a settlement before going either of
these routes. One possibility would be to offer a settlement of 50 cents
on the dollar for immediate payment. If this offer is not accepted, you
have not limited yourself in the other options.
The biggest mistake a small business can make is spending too much time
trying to collect. It sounds to me like you are being reasonable about
this, and just need a resolution. I hope you get your money.
