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Business Insights

February 2009
Business Insights

By Sonjui Kumar and Roy Banerjee

These are common and often daunting challenges that most small businesses contend with. Before you know it, a client’s outstanding balance can become $5000 or more. If you have worked with your client and have still been unsuccessful in collecting your money, then what can you do? Everyone knows that hiring a lawyer is expensive and time consuming. Sometimes your state’s small claims court may be the answer. This article will provide a general guide through the process of filing a claim in small claims court. However, because the process is different in each state, you need to check your state’s requirements before filing your claim.   

What are small claims courts?

As the name suggests, small claims courts are courts that decide disputes between parties, including individuals and businesses, disputes over smaller sums of money or certain types of matters. A person may represent themselves, or if they choose, they may hire an attorney. Small claims courts have very small filing fees and simple filing requirements. Be careful, you may still need an attorney to assist you, especially if the case is complex. Most courts make it clear that the court clerks and judges will not assist you during the process.

The name of small claims courts vary from state to state. For instance, in Georgia and South Carolina, the small claims courts are referred to as “Magistrate Courts”. In Tennessee, the small claims court is called the General Sessions Court.

What type of claims can you bring in small claims court?

Each state has guidelines that address the maximum amount of claim that can be heard in the small claims court. In Georgia the Magistrate Court claim limit is $15,000; Tennessee allows for claims up to $10,000, and claims made in South Carolina cannot exceed $7,500. Florida and North Carolina allow for claims up to $5,000 and $4,000 respectively. Finally, Alabama’s Small Claims Division does not hear claims in excess of $3,000. In some states, these maximum limits do not apply to eviction actions between a landlord and a tenant.

Generally, small claims are divided into three areas; claims involving eviction, money or personal property (see a list of “Common Examples of Small Claim Courts Suits” in the sidebar). Some states permit courts to hear claims involving personal injury. Small claims courts generally do not hear divorce, child custody/support, or cases involving real property. Prior to filing a claim, check with your state’s small claims court to make sure you are in the right place.

Who can file a claim in small claims court?

States have certain requirements on who can file a claim in small claims court. Customarily, individuals must be 18 years of age or older.

How do you file a claim in small claims court?

Depending on the state, there are various ways to file a claim in small claims court. Most states require that the individual filing the claim complete forms to file a claim. You can get these forms from the court’s clerk office. Once completed, file the forms with the court to start your suit. Other states require that a sworn statement is filed with the court. This statement must describe the facts of the case and clearly state what you are asking the court to do, for example, evict a tenant or make the other party pay you money for property damage. There may be additional filing requirements in actions for eviction.

Most courts require that a court fee be paid when filing a claim. Some courts may allow this amount to be recovered from the opposing party if the party that filed the claim wins the case.

Where do you file a claim and what happens next?

The general rule is that the claim is filed in the county where the individual you are suing lives. If you are suing a business, then the claim should be filed in the county of the registered agent for the corporation or, in the case of an unincorporated business, where the business is located. Claims can also be filed in the county where the incident that caused the dispute occurred. The other side will have a period of time, usually thirty days, to respond.

When must you file a claim in small claims court?

Claims must be brought within a certain time after the incident causing the suit occurred. Before filing a claim in small claims court you should make sure that the time limit for you to bring the claim has not expired. For example, in Georgia all personal injury suits must be filed within two years of the injury and in Tennessee, all claims for property damage must be brought within three years. Depending on the nature of the dispute, the time limit for your claim may be longer or shorter. Check with your state’s small claims court division for time limits on claims.

What information should you have when you present your claim in court?

Your purpose in taking a dispute to small claims court is to win. Therefore, you should present your case as efficiently and effectively as possible. To do so, gather all documents that are favorable to your claim and make additional copies of these documents to submit to the judge or opposing party. In many cases the documents alone are not allowed as evidence. You should always error on the side of getting as many witnesses as possible to actually appear at the court for your hearing, even though the judge may decide the witnesses are not needed. The court can give you subpoenas to require witnesses to appear at the courthouse if necessary.

How to collect the award?

If all goes well in court, a judgment will be entered in your favor. It is now your responsibility to collect the award from the opposing party. It is not unusual at this point, for the opposing party to refuse to pay. However, there are several options that exist. You may request that the court place a “lien” on the opposing party’s property and this will allow you to sell the property to collect your award. As an alternative option, you may garnish the opposing party’s wages through the filing of a garnishment action. Both of these suggested methods have additional costs and different procedures

Often times the court system appears to be intimidating and overbearing. However, if you follow the steps in this article, you can advocate on your own behalf in small claims court and hopefully win.

Sidebar 1:

Common Examples of Small Claims Court Suits:

1. Bad checks

2. Tenant is behind on rent

3. Property has been damaged or broken

4. Bad workmanship. For example, a roofer fails to replace your roof properly

5. Damage related to traffic accidents

6. Borrower refuses to return money or property

7. Merchant refuses to refund money for a faulty good

8. Failure to perform on written or verbal contracts

Sidebar 2:

Small Claims Checklist

1. Amount of your claim is less than the maximum amount limit set by the court

2. Claim is a dispute which can be heard by the small claims court

3. You are 18 years of age or older

4. File the claim in the proper county and within the time period allowed by the court

5. Collect all information, including document and witnesses favorable to your case

6. Win a judgment!

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