Client refusing to pay options

[Nathan Igo]

Long term business client of about 7 years is looking like refusing to pay last months bill. They had a covid outbreak this month so things have been tense but received a text today of "You didn't get my employee setup remotely at home within 10 minutes so you cost me $1000 which I am deducting from you paycheck". Granted their bill was due today as they are on a net 7 term but I have that gut feeling they are trying to not pay it all. It also didn't help I got the alarm of someone trying to enter the backdoor which just happened to be another IT company.

I have filed the whole mechanics lien in the past when equipment was actually sold to repo but since this was just services I am not sure if that rolls into this situation. Outside of small claims are there any other options you guys have had success with? Just looking for a few ideas before reaching out to my attorneys and paying them.

 

[Metanis]

Wouldn't your attorney ask for a copy of your contract with the customer? Then review the terms regarding service delivery and non-payment?

From what you said I would think you'd have a strong case in Small Claims court once you document and serve the customer with notice. If they've got another IT firm already on premises I'd conclude you need to fire this customer asap.

 

[Nathan Igo]

The contract and getting my attorney is no problem as its a pretty clear case but I would rather not have to pay him if needed. He also wouldn't go to small claims I would assume which would just extend everything.

I was mainly curious if there were any other routes people have taken that may be cheaper than small claims and quicker. Even a judgement in small claims doesn't mean they will actually pay.

For the IT firm on premise it was just initial meeting which set off the notifications but they found a good one that cant tell the difference the front door to the back door.

Either way the client is being dropped. Just looking for options to make sure I get paid for December.

 

[nlinecomputers]

A threatening letter from your attorney isn’t going cost much and you add the costs of collecting fees to the final bill. You can also hire a collection agent or sell the debt. if you sell the debt you will not get the full amount but you will get something.

 

[timeshifter]

How much is the bill for last month? What caused the relationship so sour so quickly?

 

[britechguy]

The question (and I'm not asking for the specific answer) also depends on how much the bill is for.

If you would spend more than the amount owed in an effort to collect the amount owed, unless you really feel driven to do so on principle, it's just not worth it.

Also, court judgments don't guarantee you'll ever be paid, either. They certainly give a strong push toward that, but some who refuse will also refuse to honor the judgment and drag things out afterward.

There is a time where "writing it off" makes more sense. I have no idea whether that's the case here, but it should be considered if the amount is small enough that it would all get eaten up, and perhaps more, in an attempt to collect it.

 

[thecomputerguy]

Sounds like your customer is also probably pretty frazzled since everyone usually takes a hit in December with it being a slower month and COVID on top of that.

I'd just explain terms you agreed to again (in email), tell him no additional work will be completed until that bill is paid in full. Give him some time to pay it (a day or two). Once it's paid, drop him either way. Have a letter drafted by your attorney and if it's not paid in a couple of days then send it. If still no response then it might even be worth just losing out on the $1000 and taking it as a loss especially since you're in CA. $1000 is good money but it's not life breaking money especially in CA.

Having a fit over a 10 minute discrepancy is not the kind of client anyone wants.

I'm also curious what the total bill was.

 

[VISA MC]

Small claims isn’t really expensive. It’s designed to be that’s way. You are not allowed an attorney and as long as they are served you’ll get a default judgement if they don’t show up. Then comes the collection part which is where most people get frustrated.

You can do a discovery subpoena which compels them to show up and answer questions under oath like what is your bank account information, EIN number etc. you can attach property or bank accounts etc if they still refuse to pay after a court order is issued. If they don’t show up for this, you ask for an order to show cause and again have them served. If they don’t show up for this, a bench warrant is issued for their arrest and bond will be set for the amount of your judgement.

There are costs associated with this but I would say less than $300 all of which are awarded to you once you can start collecting.

 

[britechguy]

once you can start collecting.

Key phrase. This is often never.

That must be considered. Also, what you describe involves a lot of precious time, effort, and emotional energy. The amount has to be worth that, just in hours required, and you need to be prepared, even after success at all steps, to still never see it.

I'm not saying that anyone should avoid doing what they feel they need to, just to consider the totality of what's involved and whether that balances out with the unpaid amount that could be obtained even if one were to obtain it.

My hourly charge (which is lower than a great many here) is $75. The process you describe will entail a lot more than 10 hours, let's say 15, conservatively, which comes to $1125. If the amount I'm owed is under that, it's absolutely not worth pursuing from a purely financial perspective. Even if it's over that, it needs to be significantly over that to make the amount of effort expended worthwhile.

Whether it's a situation like this, or any of a number of others that have nothing to do with money, one has to consider the totality of the costs involved and whether "the juice is worth the squeeze." Walking away can often make a lot more sense. I've learned this the hard way.

 

[VISA MC]

Key phrase. This is often never.

This is incorrect. You can start collecting once you have a judgement. Whether or not the person ever showed up, as long as you have a judgement you can begin.

My hourly charge (which is lower than a great many here) is $75. The process you describe will entail a lot more than 10 hours, let's say 15, conservatively, which comes to $1125.

If it takes you 15 hours to drive to your local courthouse, fill out a 1-3 page document and pay a few bucks, then you probably shouldn't be handling your own collections. I've done these several times for personal sales that went bad one of which was a vehicle sale, and accomplished the whole process start to finish in about an hour and a half.

Based on the fact that the customer is trying to short-pay $1,000 I would assume this is a larger invoice and I would say it's worth a couple hours of work. Alternatively, once you get a judgement you can give it to a collection agency and they'll do all the heavy lifting for a cost of around 20-30% at most. My agency starts at 8% and if it goes to court goes up to 20%, none of which is paid up front. It's deducted from the amount they collect on your behalf. So is it worth $200 or so to send an agency? I would say yes if you are willing to write it off, at least give it to them and see if you get anything out of them.

 

[nlinecomputers]

And on any lawsuit you can add in your court and collection costs to the lawsuit.

And often just being served will get you paid. I sued a client and he called me up and asked me to pickup the check an hour after he was served. Once the check cleared I called the court clerk and canceled the suit.

 

[VISA MC]

And on any lawsuit you can add in your court and collection costs to the lawsuit.

And often just being served will get you paid. I sued a client and he called me up and asked me to pickup the check an hour after he was served. Once the check cleared I called the court clerk and canceled the suit.

I had a condo I rented for the winter once. They tried to hold my security deposit because of issues none of which were my fault. There was an issue with the heater and it was causing moisture and mold etc. I sent the landlord an envelope with a print out of an email. The front of the envelope was stamped with RESTRICTED and all of the return receipts etc. That was actually returned to me, but the landlord received a photo of the envelop as it arrived in the PO box and it caused a check to be returned to me in full. They had no idea that there was nothing of any importance inside.

 

[britechguy]

And often just being served will get you paid.

About which I agree. But "often" is not always.

I have no idea why what I'm saying is in the slightest way controversial. Taking things to court takes time, and money, both of which you may not necessarily get back.

That needs to be a part of the calculation of "is this worth it."

Each of us must do as we see fit. But there is no one right answer and taking everything into consideration is never a bad thing.

 

[VISA MC]

About which I agree. But "often" is not always.

I have no idea why what I'm saying is in the slightest way controversial. Taking things to court takes time, and money, both of which you may not necessarily get back.

That needs to be a part of the calculation of "is this worth it."

Each of us must do as we see fit. But there is no one right answer and taking everything into consideration is never a bad thing.

I'm not disputing that it takes time. But it's an extremely small amount of time, it's not 10-15 hours. Everyone's time is valuable. Like I said it's a matter of standing at a desk and asking the clerk for the right papers, spending an hour or so in court and mailing a document. Should not be 10-15 hours.

 

[britechguy]

You can start collecting once you have a judgement. Whether or not the person ever showed up, as long as you have a judgement you can begin.

And this is a part of your time.

Unless you happen to be blessed with someone who just caves, which is wonderful, collections are not generally quick processes.

You don't get to move the goalpost and act like just your initial filing is all of the time involved, because it isn't, and is often just step one on a time-consuming process.

I have seldom heard those who've gone the route of small claims and subsequent collection call it a "quick" process.

 

[VISA MC]

And this is a part of your time.

Unless you happen to be blessed with someone who just caves, which is wonderful, collections are not generally quick processes.

You don't get to move the goalpost and act like just your initial filing is all of the time involved, because it isn't, and is often just step one on a time-consuming process.

I have seldom heard those who've gone the route of small claims and subsequent collection call it a "quick" process.

lol I think we are replying at the same time.

It's a very quick process, when done properly. If you chase the customer around trying to do it all yourself then that's what's causing the delay. You get your judgement and the person has 21 days to pay usually. If they don't pay THEN you start collecting. If Start Collecting means you call and you email and you mail letters and you show up in person and you do all that work, then yes I understand that it is time consuming. The proper way is to go back to the court, fill out the paperwork for a Discovery Subpoena which requires the defendant show up in person to tell you where they work, where they live, where they bank, etc. SO that you can attach their checking account, or do a payroll garnishment. In which case if they don't show up, they now have a bench warrant. It's very simple process, but a lot of people don't want to go that route. They would rather struggle and call and email and mail letters themself.

 

[britechguy]

The proper way is to go back to the court, fill out the paperwork for a Discovery Subpoena which requires the defendant show up in person to tell you where they work, where they live, where they bank, etc. SO that you can attach their checking account, or do a payroll garnishment.

All of which also takes time. I'm sorry, but your estimates regarding how much time the processes you describe take are not in any way similar to my own experiences in dealing with the court about what should seemingly be very simple matters. The amount of "hurry up and wait" has been, to put it mildly, substantial.

And that could very well be a function of where we each live and how busy the courts are. I'm not saying you're lying. I am saying that what you describe for yourself is an outlier experience for me and many others. If only it were so easy.

So anyone considering small claims, etc., would be well advised, if they can, to talk to someone else in their immediate area that has gone this route in the relatively recent past, as I expect that mileages will vary widely based on location.

 

[DRPCNZ]

Me personally, there would be an email going back to him stating terms of payment and telling him you expect payment in full. I would also be asking for evidence of the 10 minutes that cost him $1000.00 That would be the end of correspondence. I would then no longer be doing any further work for him and he wouldn't know until he ask for work to be done and I said no

 

[marley1]

I'm sure they is more to it than one issue. A client of 7 years doesn't turn hostile over one remote access setup.

 

[Nathan Igo]

Apologies for no updates but was busy gathering all materials needed for this. Ill try to answer most of the questions I have seen reading through.

For the bill amount I don't want to put specifics but figure 18.5 hours at Southern California's standard rate. They are purely hourly at their request because some months there is maybe 5 hours total. There was also 3 computer sold to them and setup in a rendering farm.

Tensions have been high in the office for the last 2 months with multiple people quitting and deadlines getting missed. Add the covid spread we are having on top and a lot are going back to work from home which didn't work out to well for them last time so they are just overly stressed.

For what is happening now, luckily my attorney was able to get a hearing early this morning to file a mechanics lien. Everything was approved and we have an officer of the courts lined up for Wednesday to go with me to repo the computers and serve the papers for the lien against the business. I will be out of attorney fees and the court filing fee at this point until and if they pay but the lien will stick against the company until paid. I should have dropped them months ago when things started going downhill but at this point it is more about principle. A huge reminder to myself as well to keep every bit of information and contacts with clients, you never know how quick things can turn sideways.