Small Claims Court

Small claims court is one of the ways a business owner can pursue collections and resolve other disputes without the length and expense of litigation. It is particularly effective for collecting unpaid invoices as it circumvents the use of collection agencies or lawyers, whose fees will take a big bite out of any proceeds. In fact, even the threat of small claims court can encourage voluntary payment, since many debtors want to keep their credit strong.

Other business disputes can be resolved as well. If a contract issue arises-for example, nonpayment due to a claim of poor quality work performed-the parties can get an answer quickly and inexpensively.

The dollar limits of small claims courts have been increasing, although there is a huge range within the United States. Currently, Virginia and Georgia are the highest with a top limit of $15,000, and Kentucky is at the low end with a limit of $1,500.

TIP: You have the most chance of success if you have a short, unemotional review of the facts of your case to the judge. Practice your presentation to the judge before you go to court. Written contracts, photos and other types of evidence that back up your story are permitted and will work in your favor. When you are in court, direct your eyes and your speech to the judge. Tell your version of the events directly and then state what you want as compensation for your claim.

What kinds of cases can be resolved in a small claims court?

Disputes revolving around money are one of the best uses of a small claims court. And evictions can usually be handled through the small claims system.

You cannot sue the federal government or a federal agency. Divorce, guardianship and bankruptcy are also outside the sphere of a small claims court.

Where do I go to file in small claims court?

Generally, you will use the court that is closest to the person you are suing, either his or her residence or business office. If the person or entity you are suing is located out of state or some distance from where you are, that may be a reason to pursue another path.

How do I know I will collect my money if I win in small claims court?

This is a legitimate concern. It may be that the person or business you have sued does not have the assets available to pay you. If you know your debtor has the resources to pay, you can garnish wages or look for another source of collection. One advantage-these court judgments have a long life span, so if the person or business does acquire assets, you may be able to collect in the future.

What if I lose in small claims court? Is there an option to continue pursuing my case?

Your options will depend on where the case took place. In some states, the only ground for a trial is that the judge made a mistake from a legal perspective. Other states allow an appeal within a fairly short period of time.