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Small Claims Court FAQ for Small Business

Author: R Stell Date: December 03, 2007

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Your customer refuses to pay. A supplier delivers substandard products. Someone broke or damaged your property. Are you out of luck? Maybe not. 

Relief might be available in small claims courts, which were established in many states to handle these sorts of disputes. These courts hear civil cases for claims under a certain dollar amount. Due to the simplified, informal nature of the court proceedings, claimants bring their cases without hiring an attorney. The case is heard quickly with a judgment rendered immediately, and appeals are limited.

This might sound like just the cure for your legal woe, but before you rush to court, review the following basics to make sure small claims is appropriate for your case. 

Can You Bring Your Case to Small Claims Court?

  • Small claims courts resolve disputes for relatively small amounts. Most states require that your claim be under $3,000 to $5,000, with some states like Delaware, Georgia and Tenn. going as high as $15,000 or more.  Even if your claim is worth more, courts can only award up to the threshold amount for that state.
  • Not all types of claims may be brought in small claims court. Generally, the types of claims allowed revolve around a monetary dispute. These disputes typically arise from a breach of contract, breach of warranty, failure to pay or personal injury. Some state courts might hear claims not specifically involving monetary damages, such as restitution (requesting the return of personal property) or eviction of a tenant. Other types of claims, such as filing for divorce or bankruptcy, are not permitted in small claims court.
  • The rules that specify the time period in which a claim must be brought are called statutes of limitations. They establish the maximum amount of time that can pass after an event before you lose the right to file a claim. Most statutes of limitations provide for at least one year or more to file a suit, depending on the nature of the claim.

Should You File a Claim?

  • Use small claims court as a last resort by attempting to settle the claim before filing a suit. If you have attempted to collect before, make one final request for relief. One way is to present your opponent with a demand letter. A good demand letter includes a brief summary of the facts, the damages expected and an ultimatum to pay by a certain date or face litigation. Demand letters can exhibit to the judge that you made a good faith effort to settle before rushing to the courthouse.
  • Can you win your case? Make a realistic assessment of the legal case. What appears to be fair might not always be the likely legal outcome. Even if a favorable judgment is likely, evaluate the odds of collecting damages. An opponent who is bankrupt or otherwise lacks equity might be unable to pay damages, which leads to more legal actions and more time and money spent. Also remember, if the court does not rule in your favor you will be responsible for paying court fees.
  • Can you represent yourself? Small claims courts usually involve only the parties. This means that you, the plaintiff, must present your entire case. Going to small claims court involves speaking in public, answering directed questions and presenting your case to a judge in a calm, clear and organized manner. Being argumentative, emotional or excessively nervous could adversely affect the case. 

How Do you File a Claim?

Generally, small court claims must be filed in either the county where the opponent is incorporated or where the incident occurred. There, you will complete a Statement of Claim. This includes a summary of the facts, the name of the opposing party, the requested relief, and any previous attempts to recover. If possible, attach supporting documents such as bills, receipts, letters or checks that supplement your claims. Once a claim has been filed, a court date will be set and the opposing party must be notified. Notice requirements vary from state to state, so ask the court clerk for more information.

You can obtain specific guidance for these topics from your local courthouse. Many courts publish a booklet that describes the specific small claims procedures for that court.

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