Home Business Collections: Small Claims Court

Last week I had a rather unpleasant surprise in that a check from one of my clients bounced. Luckily, this is a good client that made a mistake. I was able to resubmit the check and no harm done. However, I’ve been thinking about this a lot. What if the check was for more than $400 and/or represented a serious problem in my bank account? What if the client didn’t even pay me? What recourse would I have, since most of my home business income is made up of relatively small chunks of money?

Small claims court

One thing you can do if you having trouble with relatively small amounts is take your client (or anyone for that matter) to small claims court. Each state has different procedures for filing a claim in this manner, and there are limits on what counts as a “small claim”. This means that it is important for you to carefully check your states rules and regulations regarding small claims court. And if you are under contract, check your contract for information about the state that all disputes will be handled in. For example, I may be in Utah, but I have a client in New York, and the contract says that all disputes will be handled in accordance with New York state law. So I’d have to check out the requirements in New York state.

Realize that there are fees associated with small claims court, and that you will be expected to present documentation and evidence of your claim. This might include evidence of work done, receipts, invoices, copies of returned checks and anything else that supports your contention that your client has not, in fact, paid you. You should also be aware that you have the correct name and address of the business you are suing, or the case could be dismissed.

Since I am not a legal professional, and this information may be incomplete, it is a good idea for you to consult a legal professional if you have a question.