An increasing number of small businesses are failing and collecting on debts from them can be both frustrating and expensive. How to business owners know when to pay an attorney to pursue a claim?
"A lot of times a business owner ends up throwing good money after bad," said Ethan Minkin, a bankruptcy attorney at Ballard Spahr's Phoenix office. "If the matter goes to Supreme Court, it gets even more expensive. Right out of the gate, you've got a filing fee, and a fee for the process server, and the money you have to pay attorneys to draft and file a complaint...all of a sudden, you're into it for $1,500 and that's just the ticket to get through the door."
Mr. Minkin told The Phoenix Business Journal that there are several low-cost or free measures business owners can execute on their own when trying to collect on a bad debt. If talking doesn't work, a demand letter can often be drafted without legal assistance. Filing an action in small claims court is also less expensive than hiring an attorney. But when a lawsuit is unavoidable, the trick is getting it right the first time.