Best Practices, Operations, V4I3

LITIGATION 101: For the Plaintiff


Barry Kaufman

Attorney Barry Kaufman has a simple suggestion for shed builders and other small business owners who want to avoid having once-valued customers become late and non-paying ones.

“Have good communication with customers or clients to forestall payment issues,” says the Jacksonville, Florida-based lawyer who has been in collections 18 years.

Keeping the lines of communication open isn’t Kaufman’s only tip. He also suggests business owners “clearly set out the goals and expectations for the job so everything is clear.”

It is never a picnic for a business owner when customers are delinquent in paying their bills. Shed Builder Magazine spoke with several lawyers who specialize in creditor collections to learn what business owners can try to do to prevent accounts receivable from going unpaid, and suggestions for next steps if those attempts fail.


Kaufman has other suggestions for business owners seeking to avoid having to engage in collection efforts against late or non-paying customers.

He cites a “good invoice” as imperative for smooth transactions. But just what makes an invoice “good”?

“The invoice should be specific, well-written, legible, and itemized (providing a) description of the work to be done,” he says.

Not only does that ensure all parties understand what is expected of them to satisfy the terms of the contract, but also providing a collection attorney with such thorough documentation is of monumental assistance if an account goes unpaid.

Melissa Youngman

Melissa Youngman, a solo practitioner in commercial collections near Orlando, offers additional suggestions. She advises small business owners “to be vigilant” when it comes to enforcing terms of an invoice. It’s also prudent to create a paper trail documenting a transaction, she says.


Attorney Yale Levy, the namesake of Levy & Associates LLP, a busy creditor’s rights firm in Columbus, says just because a customer’s payment is late doesn’t mean litigation will be the only way to collect.

When a payment is tardy, he suggests someone with authority to speak on behalf of the company contact the errant customer to ask about the past-due account. That initial contact should be via email or telephone, and sometimes, both, he says. The goal, says Levy, is to “try and reach an amicable solution and save the client relationship.”

If that approach doesn’t produce a satisfactory result, it might be time to reach out to a collections agency or creditor’s rights lawyer. The big difference between the two is that agencies can only send collection letters or call debtors to inquire about the account. While a lawyer can provide those services, too, they can also do something agencies cannot: file a lawsuit against the entity
or the person in court.

Oftentimes, when a delinquent customer is contacted by a collections organization inquiring about a debt, they realize how determined the creditor is to get their money.

“It shows you’re serious, and that gets people to pay,” says Levy, who is also president of the National Creditors Bar Association.

What if your company has delivered product or is in entrenched in a project with a customer who has ignored repeated requests for payment, per the contract? Are you required to continue adhering to the contract’s terms and provide additional materials or labor?

Not in Kaufman’s opinion.

“I don’t think anyone would expect you to finish a job when you’re owed money if you were supposed to be paid” as the project proceeded, he says.


When an account receivable goes unpaid despite a business owner’s attempts to collect, it might be time to pursue the matter through the court system.

However, concedes Levy, “The legal process can be time-consuming, expensive, and, most importantly, intimidating” to those not familiar with it. Laws and procedures also vary in every state, so it’s imperative to become familiar with those regulations if you are going to pursue the matter pro se (without a lawyer).

It’s one thing to successfully secure a judgment against someone who owes money to your business, and yet another to actually collect the funds.

Something else a small business owner needs to know is that if their company is incorporated, there are states that prohibit anyone but a lawyer to represent the entity in court. According to Levy,
Ohio happens to be one jurisdiction that allows business owners to represent their company in court if the amount in question is less than $5,000.

The first thing to know if litigation is being pondered is where to file a lawsuit in the first place, and state laws dictate that. In a small claims case, matters can be dismissed, litigated, mediated, or settled. A plaintiff should also be wary the defendant may have a counter-claim or some other defense to a business owner’s contentions that money is owed on a contract. An organized paper trail is useful evidence to refute those claims.

If a defendant does not respond in a timely manner to the complaint that initiated the lawsuit, or if they do not appear in court, the judge may award the plaintiff a default judgment. That means
because the defendant did not put on a defense, the plaintiff ’s allegations are automatically believed.

Again, it’s one thing to win a judgment and yet another to actually collect money owed.

According to Levy, several options exist when a plaintiff seeks to collect on a judgment. They include bank attachments, wage garnishments, liens, and executions.

State laws dictate how much a plaintiff may garnish from a defendant’s paycheck and how often. Jurisdictional statutes also regulate how a creditor can be awarded funds from a debtor’s bank account and how they may place a lien on personal or real property.

If a business owner is pursuing a collection matter on behalf of their company, they should not threaten criminal action or write anything untrue in a written communication to the debtor, says

And, regardless of whether a business owner or lawyer handles a collection matter, it is imperative someone researches whether the debtor has filed bankruptcy. If they did, but the disgruntled
business owner pursues a collection matter anyway, they could be found guilty of violating bankruptcy law’s “automatic stay.” That “stay” acts as a protection against collection efforts during the pendency of the bankruptcy, and it’s unwise to violate it. If the bankruptcy received a discharge, the debt is likely uncollectable forever. Check with a lawyer if that’s the case.

In addition to wage garnishments, liens, and other remedies, there is another method for recovering past due funds: After a judgment is rendered, selling it to a third party so they try to collect on it for themselves.

Another cost of hiring legal representation for collection matters are the attorney fees, and every lawyer charges differently. For example, Youngman says she usually charges a flat fee through the initial demand letter, which is a written communication sent to a debtor informing them of the debt which includes statutorily required language. If payment is still not received and the case is referred to mediation, she charges a flat fee for that, too. However, if mediation fails and litigation ensues, she then charges the client an hourly rate for discovery and the trial.

Kaufman favors the contingency fee rate model, which means he is paid a percentage of what he successfully collects for his clients. For him, that percentage ranges from 25 to 30 percent, depending on the case and the client.

Considering those legal fees could amount to a considerable chunk of change, is hiring a collections lawyer a good choice if your state’s laws allow you to handle a case alone?

“You want a creditor’s rights attorney to handle these cases to know what’s available to you. It’s also important for business owners to have realistic expectations about how much they may collect,
so they should keep an open mind through the process,” says Levy.

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