When all else fails, you may consider filing a lawsuit to collect on delinquent accounts. But you may not be comfortable taking this course of action. You may fear that it will be too costly, or that legal fees will end up being more than the amount recovered. However, this is not always the case. Understanding how the Courts operate will help explain why.
The New Jersey Civil Court system, where money judgments are entered, is separated into three parts, Superior Court, the Special Civil Part, and Small Claims. In Superior Court the amount that can be sued for is unlimited and cases go through the discovery process and take time to get to trial. The Special Civil Part is designed to move cases through more quickly. In the Special Civil Part the limit is fifteen thousand dollars. Small Claims handles cases in which the demand is not more than three thousand dollars.
Cases filed in the Special Civil Part can come to trial within three months of being filed and trials rarely last more than a few hours. Filing fees are low. Discovery can and should be limited to interrogatories and document demands to avoid the cost of depositions. Most cases are resolved before trial through mandatory mediation on the morning of trial, and often with the Judge’s intervention. When a case is settled the parties file an enforceable settlement agreement, sometimes including a schedule of payments.
For cases filed in Special Civil Part, entities such as corporations or limited liability companies must be represented by an attorney under New Jersey law, so retaining an attorney cannot be avoided. Attorneys can be retained either on a contingency, fixed fee, or hourly basis. It’s also possible to combine these with the attorney taking a portion of his or her fee up front, and agreeing to the balance if there is a recovery.
This knowledge allows you to consider pursuing bad debts and engaging the legal system to your advantage. It may also be necessary to do so from an accounting position, as a bad debt sometimes cannot be simply written off without an attempt to collect it. If your business has bad debts or monies owed to it, consider contacting this office, or an attorney of your choice. It may be very worthwhile.
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