Collecting past due payments can be time-consuming for lawyers. There are various routes to take when a client simply won’t pay their bills, but the recommended course of action is to try to collect outside of court if possible.
To start, lawyers can write a payment demand or collection letter to the client outlining the original terms of the invoice, the amount and requested next steps. Depending on the client’s ability to pay, the invoice amount and the current cash flow of the firm, it may be worth considering a settlement offer for less than the original amount owed. The client may be able to afford a smaller amount and at that point the firm can close out the collection process.
Depending on the nature of any contracts with your client, you can either sue them in small claims court, sue them in Superior Court or take them to arbitration. These methods can take up considerable time, so be sure to evaluate whether or not it’s worth the time investment.
It’s also important to consider the statute of limitations for a malpractice claim. A common recommendation is to wait to proceed with a collections lawsuit until after the statute for a malpractice claim has passed.
Lawyers can’t write off bad debt to have it become tax deductible, so being upfront with clear payment policies, cost expectations and consistent billing can help avoid collection situations.