As with any comparison of two things, there are always the pros and cons. Below is an outlay of the comparison of using a collection agency versus taking your debtor to small claims court. We have tried to remain as objective as possible.
First, lets define what collection agencies and small claims are.
Collection agencies are organizations that specializes in debt collection. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.
Small Claims, and in turn small claims court where they are heard, is special court, sometimes called conciliation court, that provides expeditious, informal, and inexpensive adjudication of small claims. Every state has established a small claims or conciliation court to resolve legal disputes involving an amount of money that is less than a set dollar amount. You can find a list of the maximum amount that each state will hear for small claims court (https://www.nolo.com/legal-encyclopedia/small-claims-suits-how-much-30031.html).
There are pros and cons to each side of the equation and many of the pros and cons reflect the cons and pros of the opposite side.
Those who consider themselves, “control-freaks”, may prefer to take matters to small claims court on their own. They do so with risk. They risk losing productive hours that could better be spent building their business, and of course they risk losing the debt all together. There is never any guarantees in court.
The real question to be asked: Is your time worth more than what you would pay in a collection agency’s contingency fees?
If the answer is yes, and in almost every circumstance it certainly is, use a collection agency. They will allow you to stay on top of your business, avoid losing productive hours, and most importantly, likely
On the other hand if you are not one who easily delegate tasks, and your debt qualifies for small claims, it may be worth your while to take your debt to small claims court.
We have outlined in list form below:
Collection Agency
Pros:
Cons:
Small Claims Court:
Brett Gelfand and Cody Ziering are the founders and managing parters of CannaBIZ Collects LLC. Previously, Gelfand and Ziering together, helped build a Colorado cannabis wholesale operation from the ground up, including an indoor cultivation, edible kitchen, extract lab, and dispensary. During their tenure in Colorado, both executives recognized the burden cannabis companies were experiencing when releasing credit terms to other cannabis firms. Brett’s father, Attorney Ross Gelfand, joined the CBC team, and together the three started CannaBIZ Collects. Ross has over 30+ years of commercial collection experience and sold his collection agency and law practice in 2012. Brett and Cody convinced Ross to focus his attention on the growing credit and collection trend in the cannabis space.
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