Last updated July 1st, 2005

ScottOnWriting.NET :: My Small Claims Court Experience

Since 2000 I have been working for myself as an independent contractor, primarily focusing on consulting, training, and writing about ASP.NET. One concern of every self-employed person is getting paid for the work they've completed. If you've been in business for yourself long enough you've no doubt had at least one negative experience with a very slooooooooow paying client or, worse of all, a client that cannot or will not pay what is owed to you. (Of course the best approach is to not get into such a situation in the first place - require payment up front for each milestone - or limit the loss by completing only one milestone at a time and not proceeding until payment for that particular milestone is received in full.)

When a client doesn't pay I am aware of three available options:

  1. Do nothing - just chalk up the experience, write off the loss on your expense sheet, and never do business with that client again.  This is the easiest approach as it requires no action on your part, counts as income off the top at the end of the year, and can help teach a valuable lesson moving forward.  However, you don't get paid, so that's a bummer.
  2. Sell the debt to a collection company - I've never done this but have talked to consultants who have gone this route.  Essentially you sell what is owed to you to another company for pennies on the dollar and let them hassle the client for their money.  This approach takes a bit more work than doing nothing, but not too much more, and you do get something.  Problem is, you get much less than was owed, although I assume you can take the difference off your income sheet at the end of the year.
  3. Get a judgement against the client - that means take them to court and sue them for the money owed.  This can, of course, be expensive and time consuming and might not yield any results, especially if the client can't pay because they simply don't have the cash.  This route can be especially a hassle if they money owed exceeds the limits allowed for small claims court (hence necessitating hiring a lawyer) or if the client resides in another state or city.

In my consulting business I have had my fair share of no-pays in the past and since then have adopted a policy that I will not take a new client on without him prepaying for what I estimate to be at least the first month of the project's costs. After that initial period, as I develop trust with the client and get some experiencing interacting with them, I decide whether or not to continue doing business with the client. After that first month I move to a more traditional Net 15 or Net 30 billing cycle.

However, this policy is not one I've adopted in my training services, unfortunately, and I recently got bitten by a non-paying client. Rather than chalking this one up to experience and simply moving on I have decided to pursue this client using option #3 - taking them to court for the money owed. Why this change of policy? Two reasons: first, and most importantly, this client seems very unethical. They claim that they have yet to pay me because of cash flow reasons, yet they've continued to operate their business for six months since payment was due. Furthermore, I have talked with a number of other instructors they have hired during various times (both before and after me) saying that they, too, have yet to be paid. This behavior makes me sick to my stomach. Second, and more trivially, I am curious about the whole small claims court process. I've never been to any sort of court matter before, so it will be interesting to observe and record the process and results.

I am keeping a journal of my experiences in this matter in my blog so that other self-employed software consultants can benefit from my experience. As you read the related blog entries listed below feel free to leave a comment to share any experiences you've had in similar situations.

A Short History of the Events

This story starts back in October 2004 when, out of the blue, I received an email from a local training company asking if I was interested in teaching a three-day ASP.NET class at their facilities for clients they had already lined up. We arrived at terms and I ended up teaching the class. On the final day I left an invoice with the person I had lined up the class with and headed home.

About six weeks later I emailed the company back, asking for an update on when I should expect payment. They wrote back promptly, explaining that they needed some paperwork first - W9s and the like - which I provided. After another couple of weeks and no check in the mail, I emailed again, checking on the status. No response. I called and got voicemail, but no call backs.

At this point I figured that it was just lost money, and chalked up the loss to experience. However, in January 2005 I got an email from someone else at the company asking if I'd be interested in teaching another ASP.NET class. I thought this was rather incredulous, seeing as they were overdue three months on the payment they owed me for the last class I taught. I let them know how I felt and said I would only do the class if they paid me the money owed from the October 2004 class the day I arrived. No check for that class, no instruction. In retrospect, I should have also insisted that I receive payment for the class I was about to teach... another lesson learned!

In any event when I arrived I did receive the check for the October 2004 class and an explanation (I would hardly call it an apology) that the person I had been in contact with before had left the company and any emails or voicemails left to her simply vanished into some black hole. I was given a new point of contact - the company owner - and asked to use this person for all questions or payment matters going forward.

I finished my three-day class and, as before, left an invoice on my way out the door. When March rolled around and I had yet to be paid for my January class, I emailed the company owner. I left voicemails. I called the secretary and asked to be put through and got the, "She's on the other line, would you like me to direct you to her voicemail?" routine. After a couple weeks of this I emailed the owner and explained how I had tried to contact her multiple times and the only choice now was small claims court. That, finally, got a response - she apologized that she had not gotten back to me, that she was waiting on a check to arrive from a client, and once that payment was received I'd be promptly paid.

Five weeks later and no payment received and additional email/voicemail ignored, I sent a demand letter basically stating my case, providing an expected payment date, and mentioning small claims court is what would follow should payment not be received by the specified date. Well, that specified date came and went, and here we are now. My blog entries pick up where this history leaves off...

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