Business organizations have been losing in their collection efforts despite the frequency of letters, phone calls or other interventions. This is particularly true for debtor accounts that have been mismanaged interms of focus – such that their paying behaviors require legal means. The Supreme Court of the Philippines realized the voluminous court cases for “collection of debts” – that they set-up the Small Claims Court to unclog these cases. The model avoids “the legal interference of lawyers.”
All credit professionals have experienced clients or customers with past due balances. They make repeated promises to pay …. but never do. We appeal, without success, to their sense of honor and fair play, their legal and moral obligation, and threaten them with held orders, reduction of credit availability, interest, poor credit report and still nothing works. They just won’t pay.
Small claims court can be particularly cost effective for collecting unpaid bills because it eliminates the need for an attorney. In fact, small claims court works so well that in many courts over 60% of the cases heard are filed by businesses both large and small. A large percentage of these filings are uncontested by the defendant (they know they owe the money and fail to appear at trial), therefore, little preparation or actual court time is required of the plaintiff. Best of all, many defendants who don’t want their credit history damaged pay voluntarily – sometime between receiving the final demand letter and summons and the date judgment is issued.
Disputes between businesses and its customer and/or vendor are also common in small claims court. Most involve a contract. Commonly, one business will argue that goods and/or services were of poor quality, provided late or not at all. If the parties don’t negotiate their own solution or arrive at one through mediation, each would have the opportunity to present their side of the story to a small claims judge.
Upon presenting their case the judge will decide the case based on both testimony and evidence produced during trial. Instead of waiting for months for a decision, as can happen in normal court proceedings, the judge will either announce his/her decision immediately or mail it to both parties within a few days following the conclusion of the trial. Either way, both parties will know where they stand and be able to return to operating their business.
It is important to realize that when you file a matter in small claims, you do most of the work yourself. It will be your responsibility to gather evidence, prepare documents, subpoena and interview witnesses, represent yourself at trial. It will also be your responsibility to check with the clerk of the court about trial dates.
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