What to do when you don’t get paid

Almost all businesses have collection problems from time to time; for some businesses, collection of past due invoices is the most important problem. Generally, when a client calls me about collections, he has already gone through the full gamut of ordinary collection techniques: monthly billing, reminder billing, reminder letters, warning letters, phone calls, email, etc. Often, they have already received multiple payment promises and have been disappointed. As a result, I usually don’t worry too much about ‘lawyer letters’ for collection; if the non-paying customer were to reply to a sternly worded letter, he would have already done so.

The comments that follow are oriented around the commercial collection of important unpaid invoices. Specialized collection agencies and law firms deal with the problems inherent in collecting small sums of money from many clients at the consumer level. In Pennsylvania, you can use the district court procedures described below to collect a small bill on your own, but consider whether the time and cost involved are justified. Almost every state has a court where procedures are simplified, and the court is designed to allow non-lawyers to bring lawsuits for less than the jurisdictional limit.

Before we talk about getting a civil judgment for money owed, it’s helpful to review a few (perhaps obvious) basics. There is no debtors’ prison in the United States. If someone owes you money, they are generally not breaking any criminal law. The police will not arrest them or make them pay, even after getting a judgment. In general (although clients often tell me otherwise), a broken promise to make a payment is not “fraud” in the legal sense. So, what is a civil lawsuit for money? What is the point? A money judgment is really the right to send a bailiff or bailiff to seize (take legal possession of) the debtor’s assets, up to the value of the judgment. Some logical consequences follow from this precept: if the debtor has no assets, he may be wasting his time. Judgments often need to be transferred to the county or state (depending on state legal rules) where the assets are located. Assets include bank accounts, real estate (good, because they can’t run away or hide), valuable machinery or equipment, and third-party money that is owed to the debtor but is still held by a third party. When you’re looking to collect money from a judgment, what you want is the value of the asset – the judgment is the means of ordering the bailiff to garnish (garnish or “freeze”) that asset and set the limit on how much you can attach Garnish the account A debtor’s current can have a catastrophic effect (checks begin to bounce, with additional bank charges), so even if the amount of money in the account is less than your judgment, the very painful and panic-filled phone call you follows freezing a checking account is often followed by payment in full.

In Pennsylvania, once a judgment is entered with the Prothonotary (civil clerk) of the Court of Common Pleas in a particular county, the judgment also acts as a lien on all real property held by the debtor in that county. In large money lawsuits, lien priority can become important (first in time, first in right is the rule) because judgment liens, like second mortgages, are paid by foreclosure if there are enough proceeds from the mortgage. bailiff’s sale, but not otherwise – and the purchase money mortgage lender always comes first.

So how do you get a trial? If the amount you are seeking is $8,000 or less, then you can go to a local district court. The good news is that filing fees are low, typically less than $150, and recoverable on a favorable judgment; you fill out a simple form to start the lawsuit; you can proceed without an attorney (a corporation must be represented by one of its officers); there are no pre-trial discovery procedures, which generate legal expenses; default judgments (no response from the defendant) are common; the case is usually heard within a few weeks or months (although adjournments are common and can be frustrating); and most district judges take a fairly liberal view of the rules of evidence and procedure, to allow parties to present their cases even without knowing the applicable legal rules. Convince the district judge and you’ll get a sentence, within days after the hearing, up to the court’s jurisdictional limit.

The district court procedures for money debt difficulties are: you don’t know what defense the other party will make, if any, before the hearing; hearing rules are equally liberal for the other party and the outcome of district court proceedings is often unpredictable; there is no explanation why the sentence is what it is – the court simply issues a form that awards money or not; the losing party can appeal their favorable ruling from the district judge with little difficulty and cost to the County Court of Common Pleas, which means they have to start over in a forum where they need a lawyer to navigate the complex legal rules of the civil procedure; the district judge’s judgment is not a judgment of record involving real property unless you wait thirty days for the appeal period to elapse and then transfer the judgment to the Court of Common Pleas; can only execute (garnish) the debtor’s tangible personal property – cannot seize bank accounts or other property held by others (called a garnishment) pursuant to a district court judgment.

If the thirty-day appeal period has elapsed, you can transfer a district judge’s judgment to the Court of Common Pleas by paying a small fee and obtaining a certified copy of the judgment, although there are some rules about entering judgments in Court. of common reasons you may need help with. After that, you have all the various techniques available, including garnishment, to collect a judgment. Somewhere along this path described above, if they have the means, defendants often tire of the litigation ‘dance’ and arrange to foot the bill. If they pay the bill, you take whatever steps are necessary to show that the judgment was met.

If the amount exceeds $8,000, or the district judge’s decision is appealed, or if you simply decided to skip the district judge’s step altogether, you can file a complaint in the Court of Common Pleas. Although you can try to proceed pro se (without an attorney), it is very difficult to do so successfully: the Pennsylvania Rules of Civil Procedure and local county practices (each county has its own set of local rules) are too complex. Also, legal entities such as corporations and limited liability companies must proceed through a licensed attorney in a civil lawsuit for money at the Common Pleas level in Pennsylvania.

Any complaint is time-consuming to draft, file with the clerk, and serve the debtor through the bailiff, which means legal expenses for you – the amount of the unpaid bill should make it worth it. On the other hand, a lawsuit mandates a response on a specific schedule, in a very specific format (a defendant has twenty days to respond after the sheriff’s notice and receives a warning letter ten days later). If no response is filed after the ten-day letter time period has elapsed, we enter a default judgment and may begin the asset search. In my experience, when there is no actual dispute about the services or goods provided, just an unwillingness or inability to pay, default judgments are common. Often, close to the time a response is due, we get a call from the debtor’s attorney, seeking to suspend the litigation, negotiate a payment schedule, and possibly request some concessions on payment terms, refunds, or credits. for some dispute items. etc. It usually makes sense to give some concessions to get paid and wrap things up. In one case, after going through the entire process and transferring the resulting judgment to another state for enforcement, where we garnished a bank account (and hired a local attorney to help), my client collected the money he was owed (even though with some losses due to legal costs). Some time later, my client and the debtor went back into business together, but my client demanded and got full payment up front and the relationship has worked ever since.

A bankruptcy petition stops the collection process entirely, pending bankruptcy proceedings. Contractors who are owed money for work done on homes or buildings often have mechanics liens in addition to the more common steps available to any creditor. Mechanics lien law has recently changed in Pennsylvania for the better, especially for subcontractors, but mechanics lien law can be complex in terms of proper lien notice, timing, and filing.

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