Law Outside the Box

Before you even think about filing a small claims court (also known as conciliation court) case against someone who owes you money, sit down and answer these 3 questions:

1 – How much am I owed?

The maximum amount you can sue for in small claims court is $7500.  If you have a customer that owes you $11,000 for work you did for that customer, you either have to file a lawsuit in District Court to recover that full amount or you have to be willing to waive recovering $3500 of the $11,000 if you are going to file a lawsuit in small claims court.  You cannot sue for $7500 in one small claims case and the remaining $3500 in another small claims case.  I’ve seen people try this a few times but it is not permissible under law.

2 – How likely will the debtor pay me if I win?

This can be a very tough question to answer.  If it’s anything less than an 80 - 90% chance that the debtor will pay you what you’re owed, then I strongly recommend you carefully reconsider bringing a case to small claims court.  There needs to be a high likelihood that the debtor will pay you because winning a judgment in small claims court does not guarantee payment.

3 – Would it make more sense for me to file in District Court instead?

Generally, I recommend that if you are suing for over $2500 that you carefully evaluate whether filing in District Court instead is the better option.  The cost to file a case in district court is about three times as high as small claims court.  However, if you win a judgment in district court, you have the power to enforce it if the debtor is unwilling to pay.  In small claims court, if you win a judgment, you do not have that same power.  As a result, you may end up having to take your case over to district court anyway to enforce the judgment.  You will then pay the district court filing fees (which is in addition to the small claims court filing fees).  From that perspective, small claims court is not as attractive.

For more information about small claims court, read this article.