You’ve sent numerous bills, tried calling a few times and written threatening letters — still you get no response. You have sold goods or provided your best services, all in good faith, and the customer is not paying your bill. What do you do next?
Some businesses work accounts internally for 60-90 days and then send them out to collection agencies. Others deal directly with their attorney and turn the accounts over for legal action. But when all is said and done, the only thing available after the calls, letters and notices is a law suit. Litigation has become a way of life for many American businesses — “If he hasn’t sued me, it means I need the money more than he does.” A sad statement, however, a true reflection of the attitude of some debtors.
Once the decision to file suit is made, a Complaint is typically filed in the District Court of Maryland for the proper County for claims less than $30,000.00 and in Circuit Court for claims in excess of $30,000.00 (Federal Court may also be available but is not discussed here). A corporation must be represented by an attorney (except in certain small claims cases), however, an individual may file suit without an attorney.
The most important first step, however, is to be sure you have the proper name (individual or corporate) of the Defendant and that the Court has jurisdiction. Just because you are in Maryland does not mean you can sue the Defendant here. Typically, the Defendant must either work or reside here or must have come here for the purposes of “doing business” in this state for you to successfully sue a Defendant in Maryland.
The case is initiated by the filing of a “Complaint” detailing the nature of the transaction and showing why the Defendant owes you money, along with a request for a Summons and a Return of Process. These are standard pre-printed forms available at the District Court. The District Court filing fee for a small claims case is $34.00 (up to $5,000) and $46.00 for larger cases. See District Court of Maryland Cost Schedule. The Defendant must then be properly served with the Complaint by certified mail or by the Sheriff. Alternatively, arrangements may be made to serve the Defendant by private process server.
Trial dates are set about 60 to 120 days after you file your Complaint. If the case is small claims, the proceeding is informal and you are not bound by the strict rules of evidence. For example, hearsay evidence can be admitted (though it is given much less weight by the Judge). In regular claims, you are bound by the strict rules of evidence and legal training is almost vital to properly put on your case in the face of any reasonable defense.
While it is usually advisable to have counsel representing you in a suit, there may be instances where it may be appropriate to file suit on your own. The clerks will attempt to provide some limited assistance, however, they will normally advise a Plaintiff to consult with an attorney.
Once your complaint is filed and you have served the Defendant with a summons (either by Certified Mail, the Sheriff or by Private Process Server), you must be prepared for a trial. If the Defendant does not file a “Notice of Intention to Defend” and fails to show up in Court on the date of the trial, you may obtain a judgment by default. However, if the Defendant files a Notice of Intention to Defend, you will have to prove your case in Court before a District Court Judge.
The case dockets are quite heavy and there will likely be many other cases set for trial on the morning or afternoon of your trial. The Clerk will call the docket in order and each case will be heard in turn. If your case is for an amount in excess of $5,000.00 you will be bound by the strict rules of evidence.
To prove your case, it is necessary to have a witness who has firsthand knowledge of the case and is competent to testify. If, for example, your case is one for goods sold and delivered, you will have to testify to the sale of the goods and put into evidence documents that are kept in the ordinary course of your business. Such documents will include purchase orders, contracts, agreements of sale, invoices, delivery receipts, dishonored checks and the like. Once the documents are accepted into evidence by the Judge, you will testify that payment has been demanded and not received and what the exact balance is.
Assuming the Defendant has no legal defenses (e.g. he or she never received the goods, the goods were defective and you were given a chance to correct the defect but failed to “cure”, or other defenses), the judge will normally grant you judgment in the amount proved at trial.
Once you receive judgment in your favor, do not expect to walk out of the Courtroom with your money. A judgment is merely an entry by the Court that the Defendant is absolutely indebted to you in the amount awarded and the judgment becomes a lien against the property of the Defendant. The difficult part then is collecting on the judgment. There are various tools available for enforcement of a judgment that will be discussed in our next article.
The above is presented as a mere overview of what you may expect in the trial of a collection case. You should review your case with your attorney before filing suit. If substantial sums are involved, you should never attempt handling your own case as you may lose on a mere technicality thereby forever foreclosing your ability to collect the money. Finally, as in any matter involving receivables, time is of the essence. Don’t let your case get “old and cold.” The Statute of Limitations may run, the debtor may move away from the jurisdiction or may declare bankruptcy. Act with speed and diligence but never lose sight of the adage that the most important thing about a hole is knowing when to stop digging. Many cases are just uncollectible and should be recognized as such.
If you have any questions regarding collection of accounts please contact Jonathan Bromberg at Bromberg Rosenthal LLC (301/251-6200) or by completing the contact form below.