Their lovin' don't pay my bills

December 10, 2009 9:32 PM

I'm a freelance writer who's considering suing a client for nonpayment. Before I go there, please give me the benefit of your experience.

I'm being stiffed by a client for almost $10K. After several months of collections efforts, a demand letter from my attorney resulted in assurances of goodwill but nothing more.

Now I'm considering filing suit for breach of contract. The total is too large for small claims, and my attorney tells me it will cost a couple grand up front in legal fees. In the meantime, I fear my former client will soon close their doors and may file for bankruptcy.

I'm looking for experiences from other freelancers or small business owners who have been in similar situations. Did you decide to sue, or walk away? How much did you recover, and what did it end up costing? What do you know now that you wish you'd known then? Thanks for sharing your hard-earned wisdom.

posted by anonymous to work & money (12 answers total)

I get a 50% deposit up front. All invoices are due upon submission, although I sometimes build in project milestones if it's a big project. The deposit is credited against the final invoice amount, not the first part. I charge 2% monthly interest compounded monthly. If I don't get paid in full by the end of the first 30 days (and not business days) after I sent the invoice, I send a demand letter. If that isn't paid by date X, I file in small claims. I have a very detailed paper trail for all work invested in claiming costs. My contracts say the client is responsible for all and any costs involved in recovering payment. And so on.

I have only ever had to take 2 clients to court in 12+ years.

In both cases, mediation resulted in a favourable (and full) settlement for me.
posted by acoutu at 9:40 PM on December 10, 2009 [4 favorites]

I have no business advice for you, but I do have some "this is not legal advice" advice.

Have you talked with your attorney about the implications of the client's bankruptcy? If not, then you should. In all likelihood if that were to happen, you'd be SOL, unless you had taken steps beforehand to protect your interests.

On the, ahem, up side if the client is in trouble now you might get a default judgment, which should be cheaper than full-blown litigation. Even with a judgment you might still end up with nothing in a bankruptcy, but your position can be improved.
posted by lex mercatoria at 9:48 PM on December 10, 2009 [1 favorite]

One thing I'll note is that the judgment doesn't magically make your money appear. You'll still need somebody to collect that judgment. And they may take a big chunk of it in payment.
posted by Netzapper at 1:08 AM on December 11, 2009

I am a lawyer, but not your lawyer. None of this is legal advice, save for the remainder of this sentence, in bold after the colon: talk with your lawyer about this ASAP. You may be able to deal with the dispute in mediation, you may need to go to small-claims court, you may need to send a demand letter, you may need to talk with the bankruptcy court, but your lawyer is in the best position to answer this question.

I'm not sure where you are, but I believe most people who deal in currencies called "$" are in the US (as am I), so it's probably late where you are (and I really ought to go to bed). Call your lawyer first thing tomorrow morning.
posted by tellumo at 1:18 AM on December 11, 2009

This is my general experience - and only my experience. But personally, I have found that with non-paying, non-enterprise clients that do this, you will be wasting $2k.

As Netzapper says, judgment doesn't mean they'll pay. My experience is that if they aren't paying, and you have demonstrated that you're serious by solicitor's letters, letters of intent etc, they probably aren't gonna pay. They're gonna fold, declare bankruptcy, or perhaps simply disappear. You're gonna be out $2k, and totally bummed.

I'm not saying this will happen. Talk to your peers; find out if how long your clients have been non-paying for, if they have a bad rep, etc. If they have been jerking off freelancers for years, it's modus operandi; sue away. If they're new, or new to ripping off freelancers, assume the worst.
posted by smoke at 1:27 AM on December 11, 2009

Can't help with this one but my advice for the future is never let a client owe you more than can be claimed in small claims court. If its a large project, then deposit up-front and then as many small milestones as necessary to make each 'due' chunk a reasonable amount that a) can be pursued in small claims and b) isn't financially devastating if they don't pay.

I've never had to deal with a situation like this but have you looked into selling the debt to a collection agency?
posted by missmagenta at 1:43 AM on December 11, 2009 [1 favorite]

Former freelancer here: I've never been out that much, but I have had clients fold on me. I'll never see that money.

What I would do is call a few fellow freelancers and casually ask "hey, have you had any problems getting money from X?". If they have (or are), you might be able to share their experiences in getting paid. It might be as simple as finding the right person to bug. If they are chasing payment too, it might be a sign that the company is about to fold.

As to the deposit thing: perhaps good advice for future, but not helpful for the poster right now.
posted by baggers at 6:21 AM on December 11, 2009

Legal fees and the tax on your time are going to add up into the thousands. It might be worth considering contacting the owner(s) directly and offering them a deal: "$5K in the form of a money order by tomorrow, otherwise we both go legal." Not the best outcome, I know. But when you're dealing with a client who is sinking fast, it can be near impossible to get paid. Blood from a stone and all that.

Always...always insist on a cashable deposit in advance of a large project. If the client balks at that, then take that as a sign that they're not serious.
posted by runningdogofcapitalism at 8:04 AM on December 11, 2009

It's probably worth talking to a collection agency; there's a ton in google. I've had to get close to this step before, but haven't quite gotten there myself. My understanding is that they'll split whatever money they can recover from the other folks.

You may want to talk to your lawyer about intellectual property rights to the material that you've produced. If your client hasn't paid you for the work you've done, then you haven't received what you're due- meaning that their legal rights to use your material may be gone. Depending on the value and use of the work that you produced, you may be able to mount a very credible case for immediate payment- especially if it was to be used by a third party, and they've essentially re-sold your work as part of a bigger deliverable.
posted by jenkinsEar at 8:06 AM on December 11, 2009 [2 favorites]

Just an idea, depending on the small claims limit in your jurisdiction and the impending potential bankruptcy - might it make sense to sue for the limit in small claims court and write off the rest? If the limit is $7000, and legal fees would cost you $2000, then you've only lost $1000. Plus, you want to be able to start collection ASAP if bankruptcy really is a possibility.
posted by Dasein at 8:51 AM on December 11, 2009

I have been there - nearly exactly. In 2004 I contracted to collaborate(/ghostwrite) a script for a semi-esteemed and well-financied Czech producer. I agreed to work for scale, and from the producer's very scant research and ideas (think: two pages of rough scribblings) I created a significant and workable outline and story, and began work on the first draft. Every few days for two months, the producer would drop by to check on me, and I when I had finished half of the first draft, he went back to Czech to secure the financing.

He never returned, he hired a Czech first-time writer to work from my outline and cannibalize my first draft, and he shot the project as a Dogme film abroad, made a small profit, and sent me -- yes -- a 'thank you' card. Three months of lawyers, international copyright law, late night panic attacks, transatlantic faxes, screaming conference calls, and all I got was a hefty legal bill and the opportunity to spend more on foreign counsul. Oh: I also got a free DVD of his (my) film, but I threw it out.

It will be hard for you to get your money. Very, very hard. I would walk away, but not hesitate to make public the screwing-over you got from your former client. Let everyone know what happened to you -- make sure nobody gets bilked again.
posted by mr. remy at 11:13 AM on December 11, 2009

Can you go visit them? Show up in person and ask for payment. Be calm, polite, but firmly insist on at least partial payment. If they really don't have it, getting a judgment does you little good. If they have a little bit, they're more likely to pay whoever is hardest to ignore.
posted by theora55 at 11:01 AM on December 13, 2009