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Should you file a lawsuit when someone owes your business money?

On Behalf of | Dec 30, 2020 | Business Litigation |

As a business owner, there is little more frustrating than someone owing you money. If you are struggling to pay your staff on time, keep up with loan repayments and keep your company afloat, one late payment can be enough to sink you. Filing a lawsuit may seem the obvious answer, but is it always the best?

What are the advantages of a lawsuit?

  • It encourages payment: Many late payers suddenly come up with the money they claimed not to have when threatened with legal action. Even a letter from an attorney can be enough to scare them into paying.
  • It makes you a priority: If a company owes you money, they may well owe money to others too. By taking or threatening legal action, they may decide it is best to prioritize paying you.

What are the disadvantages of a lawsuit?

  • It’s aggressive: Most clients will not take a lawsuit well. They may feel you could show more empathy for their situation and decide against working with you in the future.
  • It costs money: Both you and the individual or company that owes you money will spend more if you take legal action. If either of you is struggling to survive, it may be a step too far. If they declare bankruptcy, you may never get paid.

You understand your business and your clients better than anyone. You are the one that must decide whether a lawsuit is the correct action. An attorney can advise you on how the process will work and how long it may take. They can also review your contracts to assess the likelihood that business litigation will succeed.