These 4 steps will give you a high level look at what needs to be done through this process. It’s tough to cover all the details and in the end you are better off consulting with a professional than going it alone in the collection process.
STEP 1: Accounting
Having an accurate accounting of what is owed is important. The individual who is in charge of the books and records not only needs to ensure that you are going to claim an accurate amount owed but also be prepared to testify as to those amounts owed. It is not uncommon for partial payments to be made or other issues that can make the number on an invoice inaccurate. Knowing the amount owed before you start can impact the later steps in the process.
STEP 2: Drafting a Complaint
Drafting the complaint is the another vital step and often the most complicated. Knowing which court to file in, how to format the complaint, what to include in the complaint and even what claims should be part of the complaint can be overwhelming.
Filing in the wrong court, filing a complaint that does not meet the Michigan Court Rules or not including the proper facts, demands, and testimony can all lead to your collection lawsuit being dismissed. If your case is dismissed you collect nothing and lose more money because of court costs.
The two most common claims in a collections suit are breach of contract and account stated. Each has its own specific elements and requirements that must be proven for you to collect. There are other potential claims depending on the specific facts of the situation. Making sure you properly plead you claims is important because missing facts or elements can also lead you your collections suit being dismissed.
STEP 3: Getting a Judgment
Once you have filed your complaint then everything is about getting that judgment. Depending on the amount you are trying to collect on, the process of obtaining the judgment can vary. In small claims court, generally there is one hearing held and a judge or magistrate makes a ruling. In circuit court, there is a lengthy process and motions and maybe even a trial before a judgment is reached.
STEP 4: Collecting
Most people think that once they get a judgment that is the end of the road but in reality it is just the beginning. A judgment just gets you to a point that allows you to take the necessary steps to collect. One such step is garnishing wages or tax returns. It can also come in the form of seizing property or placing liens on other property. There are processes that can help you know which method will be the most effective to collecting the money owed.
There are a lot of details with all of this and the collection process can be overwhelming. Trying to go it alone because you think that you can do it better or because you think you can save your business some money can lead to bigger issues. Not only do you waste your own valuable time but the results might not be what you expect them to be. Your business is better off hiring a professional to assist you with this process. Many attorneys can help you avoid these situations through a comprehensive plan to help avoid a collections lawsuit from arising.