Recently on our bankruptcy forum a user asked, “I am in dire financial straits. In fact, I am considering filing bankruptcy. I have a friend who owes me $6,000. What can I do to get my money back? I have already discussed payments with them but they refuse to pay me.”
Although the processes and procedures may vary, states generally allow plaintiffs to seek compensation for private disputes for a limited amount of money in small claims court.
The monetary amount which can be claimed, however, varies by state. For example, in Indiana claimants may seek $6,000 in debt while in Iowa the maxim is $5,000. In the state of Texas, individuals can file a suit in small claims court if the case involves payment of $10,000 or less.
Keep in mind, if you win your case in small claims court it is simply a legal, judicial recognition that the defendant owes you money. You may or may not actually receive the money. The court will not arrest or file any criminal charges against the defendant. The court will simply make a judgment and then allow you to collect payment out of the property belonging to the defendant.
Enforcing the judgment from small claims court
As mentioned above, the judgment is simply a statement by the court that the defendant owes you, the plaintiff, a certain amount of money. Judgments can be collected through the following procedures:
- Garnishment Summons which allows you to receive payment through a wage garnishment.
- A Writ of Fieri Facias which allows the debtor’s personal property to be sold at auction.
- An Abstract of Judgment which allows you to place a lien against the defendant’s real estate.
- A Summons to Answer Interrogatories which allows you to obtain information to assist in the collection procedures.
Not all collection methods are allowed in all states. For example, Texas law does not allow wage garnishments for all types of unsecured debts.
How do I know if it’s time to file a claim in small claims court?
Taking someone to court to collect a debt, especially a friend, should be your last option for debt collection. First, talk to them. If that does not work, you can send them a demand letter which clearly states the terms of the loan agreement and the consequences for failing to pay the loan.
If they continue to refuse to pay it’s time to review the terms of the loan. Verify they have actually breached the terms of the contract and review whether you can file a claim in court or if the contract allows for another method of dispute resolution. For example, some contracts require mediation prior to filing a lawsuit.
If they have clearly breached the contractual terms of the loan and there is no contractual restriction to sue, you can file the claim.
Do I need a lawyer?
You do not need a lawyer to file a claim in small claims court, but you will need to review the laws of your state. Find out which court to file the claim in and verify what information you will need to file the claim. There will also be a small filing fee.
Finally, verify that the statute of limitations has not expired for filing a claim. Claimants, who wait too long to file their claim, may lose their right to compensation.
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