Sunday, January 31, 2016

How much does small claims court cost?

Just about everyone knows that small claims court revolves around three important facts:

  1. You can only sue for a small amount. The limits vary by jurisdiction. Some small claims courts have a limit as high as US$7,500, while others might have a ceiling of just US$2,500.  There's no minimum limit. It all depends on where you live and it's a good idea to check to see where the limit is currently set in your small claims court.
  2. You can't hire an attorney to represent you. In small claims court, you show up and present your case and the other guy shows up to present his. Both of you present to the judge. It's not fun and it's not pretty.
  3. Just because you win, doesn't mean you'll collect.
One of the untold stories about small claims court is that it actually costs you a fair amount of money. While it's true that you can avoid attorney's fees, there are plenty more costs to consider:

  1. Small claims court fees: You have to pay a fee, usually to the court clerk, in order to file your case. Win or lose, you have to pay to file before anything happens. The cost probably won't exceed US$100, but it will be more than US$25, for sure.
  2. Summons service fee:  Since you're not allowed to serve the other party with a summons to appear, there's a charge to have an officer of small claims court serve the summons for you. That can run you up to $US100.
  3. Lost wages: Assume you actually do end up in small claims court for a trial. You may not fork over any cash, but you also will have to take a day off work, pay for gas, parking and other costs. Even if you earn minimum wage, that's likely to cost you another US$100.
  4. Collection: Even if you win, how are you going to get your money?  You can pay a sheriff to perform a "till take," where he literally stands at the other party's place of business and takes whatever cash comes in until he has enough to pay the judgment.  But that costs another US$100 or so.  Or you can give the judgement to a collection agency. But they'll only deliver 60% of whatever they manage to collect.
Do the math. Small claims court can actually cost you well over US$300 by the time everything's said and done. And it could take months just to get that. This is why online settlement services are a new, much more efficient way to avoid small claims court.

Online settlement services are like PayPal of small claims court. You do the whole thing online from any internet device -- for as little as US$19, total. By avoiding small claims court, you circumvent lawyers, judges, sheriffs and all the extra time and money it costs to simply get the matter over and done with.  The online settlement service handles everything for both parties, calculating an amount that both find acceptable. It's faster, cheaper and takes just a few days, as opposed to a few months, while you go about your life.

Small claims courts are great, but they're expensive. Before you file, check to see if online settlement is better and faster for you.

How to pursue a small claims court matter across the country.

Small claims court can be a good resource to resolve disputes, if you have the time, money and patience to deal with the system.  There are filing fees and costs involved with serving notice on the other party. Usually, you have to pay a sheriff or an officer authorized by small claims court to serve the other guy a summons to appear.  They don't do that for free.

But even if you're willing to pay those costs and wait months for your case to be heard, there's still one major limiting factor to small claims court that you simply can't avoid:

Small claims courts are limited by jurisdiction.

That means that a small claims court can only try cases that happen in and around the cities and counties where they're situated.  That's fine if both you and the other party reside or do business within the small claims court's boundaries. But if either one of you don't live or do business within those boundaries, you're out of luck. Especially these days, when more transactions occur over the internet, fewer of them happen right next door. They could be in the next city, county or anywhere in North America.

You can't sue parties outside your jurisdiction, because chances are the amount you're disputing is less than what a lawyer would charge you to pursue the matter.  And even if you turned the matter over to a collection agency, chances are that they only pay you 60% of whatever amount they manage to collect.

Since you can't sue in small claims court, the next best tool to use is probably an online settlement service.  The reasons are simple:

  1. Most people really do want to settle disputes. Just like you, they don't need the stress, aggravation and hassles hanging over them. They want this thing out of their lives as much as you do.
  2. Most people want to stay in business and keep their credit ratings solid.  Especially in a recessionary economy, when many people are coming out of bankruptcy, nobody wants to destroy a credit score they've worked hard to rebuild. A judgement from a small claims court or a collection agency shows up on their credit history, even if it's paid in full.
  3. If it's a business dispute, people know that one bad Yelp review can kill their reputations.  That motivates them to keep customers and associates happy, especially on the internet, where anyone, anywhere can read about it.
  4. With an online settlement service, neither of you has to show up in small claims court. Our research has shown that among the top three reasons why people hate going to court is staring down the other guy. They'll do anything to avoid it. But they will respond to an online third party who's acting in their best interest.
  5. Unlike small claims court, an online settlement service will allow them to pay their negotiated settlement amount on a credit card, which allows him to pay off his settlement monthly. Small claims court makes paying a judgement nearly impossible, requiring them to pay the whole amount by cashier's check.
  6. An online settlement service allows them to handle the matter in a convenient way, any time of day or night. Like you, they have things to do, businesses to run. They'd rather deal with these kinds of things when they're not busy or rushed.
  7. Unlike small claims court or collection agencies, an online settlement service approaches them in a non-threatening way.  It offers them an opportunity to get a discount, to make their own offer and bargain a little bit without facing any hostility.
Online settlement services are fairly new, but are highly reliable. Think of them as the PayPal of disputes. They're faster, cheaper and effective, allowing both of you to get on with your lives.

Why mediation is even worse than small claims court.

If you've ever been told that "the only way to get your money is to go to small claims court," you should know that is completely not true.  In fact, small claims court is one of the worst venues for you to settle your dispute, mainly because it's costly, it rarely works and can take months to get through the process.

And even if you win in small claims court, after months of waiting, there's no guarantee you're going to get your money. That's what they don't  tell you.

At the beginning of every small claims court session, the judge (or presiding commissioner) starts off with a lecture, advising everyone to "go out in the hallway and try to settle your dispute." If you can't settle it outside the courtroom, the judge tries to scare you when he hears the case, warning that the losing party will have the verdict applied to his credit rating even if he pays in full.

Very often, the courts suggest mediation as an alternative to trial, but be warned: many mediators are even less skilled than judges at settling disputes.  In the first place, mediators charge hefty fees for their services. Secondly, it's not in a mediator's interest to settle the matter quickly: he gets paid by the hour, so dragging out the case just makes more money for him and doesn't guarantee a good settlement for you. Finally, there's no licensing or experience required to be a mediator, which means the guy who you hire likely has no idea of what your dispute is about.

Given that small claims court (and mediation) require time off from work, there are even more costs involved. Fortunately, there are now alternatives to both mediation and small claims court.  Online settlement services allow you to file your case (usually at no cost until both parties agree to the process) and settle the case for you on terms that are much better for you. The debtor usually gets a small discount and the creditor is paid within ten business days.

Online settlement services generally produce better results because there's no mediator and no small claims court involved. You describe the matter and the other party agrees to the description. After that, the service calculates a settlement amount optimized to suit the two parties, so your chances of settling are much better.

Removing costly human mediators and small claims court judges can save you time and money. Before you file in small claims court, it's a good idea to check them out.