- Small claims courts exist nationwide in every state. They are frequently used as an effective means to establish legal authority for aggressive collections and seizure of assets. First started in the 1960s, these low-level courts were created to provide a means for people to resolve simple legal issues without bogging down the main courts. Today, small claims courts regularly handle issues with a value of less than $2,500 on average (amount limits vary by state).
- Most small claims for debt recovery start well before the court hearing. Smart collectors will issue a letter of demand via registered mail to have a record of asserting 1) a debt was owed, 2) the debtor was given a chance to pay and 3) a reasonable amount of time passed without payment. This kind of letter provides strong proof in court that the creditor warned the debtor before taking legal action.
- To bolster a case made to the court, documentation of the original loan agreement and bills should be packaged for review. This material then substantiates that the debtor agreed to the debt in the first place should he argue in court that the claim is a lie.
- First off, small claims court processes don’t require an attorney for representation. Parties can pursue collections for a small fee and then have an opportunity to press their case on a debtor in person. Failure to appear and respond gives the creditor a default win. And even if the debtor does show up, if she agrees the debt is owed, then the court tends to lean in favor of the creditor.
- The claim is established in court when the creditor files a legal complaint with the court clerk, pays the fee and provides the necessary paperwork. The debtor is then notified by the court to appear and respond on a certain date when the case is to be heard. Both parties appear in front of the judge and plead their case, and then the judge issues a decision. The small claims court processes cases very quickly, with dozens of cases heard a day. As a result, issues tend to be decided quickly, without lengthy discussions. Parties who are not prepared to answer the judge’s questions with the right answers frequently get bewildered by the speed of the process.
- Just because a creditor wins a judgment doesn’t automatically mean that he gets paid. Debt recovery requires pursuit many times; the judgment simply provides the legal authority to seize assets once found. If the debtor doesn’t pay right away, then the creditor can use the judgment to effect a couple of options. These alternatives include taking a portion of the debtor's wages earned, seizing funds in identified debtor bank accounts, placing liens on the debtor’s real estate property or performing a till tap with local law enforcement (the police or sheriff enter the debtor’s store and seize any cash on hand).
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