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How To Collect Business Debts (Part 2)
The Free Credit Card TrapThey arrive in your mail - a conspicuous looking mail piece from some "official looking" bank claiming that you ..... ...... the debtor's lawyer may suggest a compromise. Think very carefully before you turn it down. Your legal costs will never be any less.
The more you can bury your pride and anger, and see the whole business as a procedure, the more likely you'll come out ahead. It also means less time spent talking to your lawyer about what amounts to your emotional reactions to the whole business. He'll listen to your problems, and guide you away from irrational decisions -- but it will cost you.
Keep your cool. Treat it like a game of chess.
The statistics are good: less than 10% of the Magistrates' Court summonses for debts ever go to trial or to arbitration at the court. The rest are settled before they get that far.
What The Lawyer Is Thinking
YOUR LAWYER doesn't want you to hit the roof when you get his bill. So if you're just chasing a few thousand dollars, he probably hopes that the debtor will make some acceptable offer before the trial. He knows this would be to your advantage. Your legal costs would probably then be reasonable, measured against the amount you'll collect.
The debtor's lawyer is thinking the same thing. Sure, the debtor has some kind of defense, but his lawyer doesn't know if it will stand up until he looks at all the details. These things are always more complicated than the client can imagine. In law, practically everything is arguable. There's no way the debtor's lawyer wants to spend huge amounts of time on this either, and run up a colossal bill, if there's some hope it won't be needed.
Upshot: the lawyers on both sides tend to do the minimum, just shadow-box for a while. To both of them, it's a fight about a small sum (a few thousand dollars). They can't afford to sink a lot of their client's money into the sort of pre-trial preparations you see in Rumpole dramas.
Usually, very little happens until about a week before the trial is due to begin. Even if the trial looks like going ahead, the lawyers still won't do as much technical preparation as they could. For a debt of say $6000, their clients just couldn't afford it. So your lawyer isn't going to look into every possible 'cause of action' and the debtor's lawyer isn't going to spend his evenings pondering subtle and sophisticated defenses.
Getting to the bottom of it: why Magistrates' Court actions need to be 'cheap'
IT ALL goes back to the scale of fees in the Magistrates' Court. The court puts limits on how much the winning side can stick the losing side for, in legal costs. There are good reasons for this. There'd be little point in having a hierarchy of courts (Magistrates', County, and Supreme) if all the courts handled cases of any size, and allowed similar costs.
The Magistrates' Court handles cases less than $25,000 and has a correspondingly modest scale of allowable fees. This means that if your lawyer's bill runs over the Court scale by say $250, you can't claim the $250 from the debtor if you win the case. You're $250 out of pocket, no matter what.
And there's something else: if you're suing for a debt of $500 or less, you aren't allowed to claim any of your legal fees from the loser. (Except in rare circumstances, not worth hoping for.) The only good news is that if you lose the case, the debtor can't hit you with a bill for part of his lawyer's fees.
To repeat: if you sue someone for $500 or less, you pay all your own lawyer's fees.
If you aren't aware of all this, your lawyer certainly is. And this is what curbs him.
Mind you, there are complicated trials in the Magistrates' Court. Sometimes it can't be helped. There might be 10 witnesses, the trial might go on for a week -- all over a debt of just $3500. Such a thing might happen, for example, if the debtor was getting legal aid. "Why worry?" he might think. "My costs are all covered. What can I lose?" (Actually, if he did lose, he'd have to pay the Court's scale costs to you. Legal aid wouldn't cover that.)
Divorce And CreditThe credit and money-related problems that can accompany a divorce used to primarily affect ..... In the higher courts, the costs themselves can become a driving force. For example, a 'small' dispute for $9000 could eventually get appealed to the Supreme Court, with costs that might soar to twenty times that on each side. Both sides are now in so deep, it's mostly the legal costs they're worried about. They want to win and collect the costs back from the loser. Stuff the $9000! Just save me from my lawyer's bills!
If you win, how much do you pocket?
MOST OF the people who buy this book will be chasing sums that would put their cases in Magistrates' Court. County Court cases normally begin at $25,000, and Supreme Court cases at $100,000. (But complex cases for smaller amounts can sometimes be started in the higher courts.)
So-o-o, let's say you win your Magistrates' Court case. You know the debtor has the money, because you checked before you started all this. Say he owes you $6000. And you have a bill from your lawyer for $3000. Question: how much of your $3000 lawyer's bill can you recover from the debtor? The hedged answer is: it depends how complex the proceedings were. If they were a lot more complex than the court scale allows for, then you'll have to pay a big whack of your lawyer's bill yourself.
Averaging over a lot of cases, the winner will recover about two-thirds of his lawyer's bill. So if you are facing a lawyer's bill of $3000, the loser will have to pay perhaps $2000 of this.
Result: of the original $6000 owed to you by the debtor, you actually pocket $5000 ( $6000 he pays you because he lost, plus $2000 of your lawyer's costs he pays you, less $3000 you have to pay your lawyer).
In a more complex case, you might only be able to recover $1500 towards your lawyer's bill from the debtor, or even only $1000. Down go your final takings.
No matter what, you'll end up a bit out of pocket. (Not to mention the time it's taken you.) You may win by default, before trial. But even if it doesn't go to trial, you still have to pay your lawyer. At different stages, the court may award you costs for this or that. But add them all up, and it won't cover what you owe your lawyer.
With arithmetic like this, you can see why your lawyer always has THE LAZY PERSON'S SECRETS TO OVERNIGHT WEALTH
There are so many simple, yet really sure-fire ways of acquiring wealth, it's a wonder everybody with even the least bit of ambition isn't already rich. When you come right down to it, the only things needed for anyone to make bundles of money are the long-range vision and the energy to put a money-making plan into force.
One of the easiest methods of building wealth, and the one most often used by the "smart" people, is to furnish the expertise, equipment or growth capital to promising beginning businesses. Basically, you buy in as either a part owner or limited partner; then, as the business grows and prospers with your help, you reap your share of the rewards.
The beautiful part about this whole concept is that you can repeat this procedure over and over again. You can start out with, say marketing and sales leadership for a small, garage-type business; then with your holdings and earnings from that business, invest in another, and keep doing this until you own a part of twenty-five to an unlimited number of businesses. Looking at the idea from a dollar return point of view, if you were getting $200 per month from 25 different businesses, your monthly income would amount to no less than $5,000 and that's not too bad for a fledgling millionaire.
Look around your own area. With just a little bit of business sense and perception, you're sure to find hundreds of small businesses that could do better - perhaps even become giants in their field - with your help.
Most small businesses need, and would welcome marketing, promotional, advertising, and sales help. If a quick survey of a business turns you on with enthusiasm about the potential profits to be made with just a few changes that you can suggest, then you are on your way.
Basically, you set up an appointment to see and talk with the business owner about some ideas and help that could double or triple his profits. When you approach him in that manner, he's almost certain to want to see you and hear what you have to say.
In preparation for your meeting, set your ideas down on paper. Put them together in an impressive marketing or profit-potential folio. Out-line your ideas, the costs involved and the ultimate profit to be gained.
Then, when you arrive for the meeting, be sure to look and act the part of a successful business person. A few pleasantries to break the ice, and then begin with your presentation.
Through your proposal, you must instill confidence that you can do all you claim for him. Guide him through the presentation to the ultimate profits - all for a 10 or 20 percent limited partnership in the business, which really won't cost him anything. Of course, if he's reluctant to give up any part of his ownership, you come back with the idea of being hired as a consultant.
Almost all small businesses need help of some kind. The owners get bogged down in a myriad of everyday problems and things to do. They find there just aren't enough hours in the day to handle everything that should be taken care of, and end up neglecting or putting off some of the things they should be doing to keep the business prosperous. As a result, the long struggle for business survival begins, with more than 60% of them selling out at a loss or just closing up shop.
The other way to "cut yourself in" on a piece of someone else's business is to supply needed money. If you can come up with 10 or 15 thousand dollars, you can easily "buy into" some small businesses. Be sure to look the business (and its market potential) over; but once you spot one that can really be a winner with just a little bit of operating cash or money for expansion, then start figuring!
You can reach a never ending supply of such businesses to choose from, simply by running a small advertisement in your daily newspaper in the classified section under the heading of Business Opportunities Wanted. Such an ad might read:
SUCCESSFUL BUSINESS EXECUTIVE LOOKING FOR NEW BUSINESS VENTURES. WILL CONSIDER BUY-OUT OR PARTNERSHIP. PO BOX 123, CITY.
By the same token, make it a habit to look through the Business Opportunities Avail able on a regular basis. Mark a few each day and follow up. Check them out, and see what kind of a deal is being offered. Remember, proper management and planning are basically the ingredients to success in business; and most small businesses just don't have these ingredients in the proportions needed to attain their greatest profit potential.
Other people have done it, and more are starting up every day. There's no reason why you can't do it. In most cases little or no cash is needed. But with just a little bit of action on your part, you could quickly become a multi-business owner, and very wealthy as well.
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