Holding My Cards Close

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templdl

Senior Member
Location
Wisconsin
I don't know what the limit is but here in WI we have a small claims court. I don't know if $12K would qualify.
Make sure that you are aware of the state statutes which may have a damage clause also. I took a land lord to small claims court 23 years ago because he would give me my security deposit back which was $600. He said to suit him and I did. Got the $600 + he paid for himself getting served at work by the sheriff, court costs, plus double damages bring his cost up to about $1,500. Well, he said to just sue him and I did. There was a lien palced on his property be the court until he paid. He paid fairly quickly but the lien was overlooked until 10 years later and I had to sign off on it.
Personally I would look into doing this thing yourself. If you have the documentation and you know the state statutes that were violates there is no reason pa pay an attorney big bucks. But be specific in the statutes that were violated. List them. They may be liable for damages for violating a contract.
Don't let is scare you.
 

satcom

Senior Member
I don't know what the limit is but here in WI we have a small claims court. I don't know if $12K would qualify.
Make sure that you are aware of the state statutes which may have a damage clause also. I took a land lord to small claims court 23 years ago because he would give me my security deposit back which was $600. He said to suit him and I did. Got the $600 + he paid for himself getting served at work by the sheriff, court costs, plus double damages bring his cost up to about $1,500. Well, he said to just sue him and I did. There was a lien palced on his property be the court until he paid. He paid fairly quickly but the lien was overlooked until 10 years later and I had to sign off on it.
Personally I would look into doing this thing yourself. If you have the documentation and you know the state statutes that were violates there is no reason pa pay an attorney big bucks. But be specific in the statutes that were violated. List them. They may be liable for damages for violating a contract.
Don't let is scare you.

I think 12k is a bit more then a small claim but worth looking into since every state has different limits, and if he is incorporated then in most states he will need a lawyer to represent him in any court including small claims.
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
I think 12k is a bit more then a small claim but worth looking into since every state has different limits, and if he is incorporated then in most states he will need a lawyer to represent him in any court including small claims.

In many states the guy being sued has the option of having the case transferred out of small claims court into a regular court room too.
 

satcom

Senior Member
In many states the guy being sued has the option of having the case transferred out of small claims court into a regular court room too.
Yup, but that could end up costing some real money in court costs and legal fees. It's a shame he has to jump all the hoops.
 
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kwired

Electron manager
Location
NE Nebraska
Hiring an attorney for a $12K job is a waste imo.
Good luck!

Still enough that not many of us want to just forget about it no matter what our financial positioin is. They especially do not want the payee to think they got away with it either. The fact they had to pay is good enough to most vs letting them get away with it - even if there is no profit when all is said and done. I kind of hate to say it, but I would rather let an attorney have all $12K then let someone get off with paying nothing for something they owed me for.
 

readydave8

re member
Location
Clarkesville, Georgia
Occupation
electrician
. . . I would rather let an attorney have all $12K then let someone get off with paying nothing for something they owed me for.
That's what I was going to say, also when you do that it helps me and when I do it it helps you, if they're not getting away with it they might not try as often.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
I don't know what the limit is but here in WI we have a small claims court. I don't know if $12K would qualify.

in california, you are limited to $5,000, max award in small claims.

so, if you have no other options, you could sue them here, but no matter what they owed you, your maximum
award would be $5,000 in small claims court. you could deduct the rest off your taxes as a bad debt,
but that's about it.

so if someone owed you $12k, you could sue them for $5k of it in small claims court, and probably win.

then all you have to do is collect it.
half the time, on something like this, they might not even bother to respond, giving you a default judgement.
then you can lien real property, and use whatever mechanisms at your disposal to force them to pay, or
sieze assest with further court action, etc.

and, at some point, the time spent chasing the deadbeats will be more than it would take to just go
earn that money working for someone who pays you.

so, you deduct the full amount of the loss, plus collection costs that you can document,
(your hourly rate times the amount of hours you spent chasing this) from your taxes.

say, for the purposes of argument, it's $12k + $2k.... $14,000 deduction.... and your tax rate is $15%,
federal and state, so your tax goes down $2,100.

that makes the amount you are really out of pocket, $9,900.00

how long does it take to earn $9,900.00? that is the point where it costs you more to chase this than
it's worth. that's the problem... oftentimes the person owing you knows better than you do where
most people will just walk away, and counts on it.

sometimes, they hope you will just sue them in small claims court... in the above scenario, they
don't even bother to respond, you get a $5k default judgement against them, and they send you
a check for $5k eventually, or when you chase them down and get it.

they just settled a $12,000 bill for $5,000.
 

kwired

Electron manager
Location
NE Nebraska
If you don't want to spend time pursuing it yourself hire a debt collection agency. They know what they can and can't do, and are a lot more persistant at contacting people than I would ever be (that is a job I would not want to do, but someone has to do it). They will take at least 40% of what they collect as their commission but you still get more than if you did nothing, and the guy that owes you did not just get away with paying nothing.
 

jmellc

Senior Member
Location
Durham, NC
Occupation
Facility Maintenance Tech. Licensed Electrician
For sure, don't let them get away with it or they will keep doing it. Anyone here could be next. Even if collecting the $ costs $, you get something instead of nothing and sometimes you can also collect costs or punitive damages.

I saw one employer nearly bankrupted over a $30,000 job and another burned by several smaller unpaid jobs.
 

templdl

Senior Member
Location
Wisconsin
in california, you are limited to $5,000, max award in small claims.

so, if you have no other options, you could sue them here, but no matter what they owed you, your maximum
award would be $5,000 in small claims court. you could deduct the rest off your taxes as a bad debt,
but that's about it.

so if someone owed you $12k, you could sue them for $5k of it in small claims court, and probably win.

then all you have to do is collect it.
half the time, on something like this, they might not even bother to respond, giving you a default judgement.
then you can lien real property, and use whatever mechanisms at your disposal to force them to pay, or
sieze assest with further court action, etc.

and, at some point, the time spent chasing the deadbeats will be more than it would take to just go
earn that money working for someone who pays you.

so, you deduct the full amount of the loss, plus collection costs that you can document,
(your hourly rate times the amount of hours you spent chasing this) from your taxes.

say, for the purposes of argument, it's $12k + $2k.... $14,000 deduction.... and your tax rate is $15%,
federal and state, so your tax goes down $2,100.

that makes the amount you are really out of pocket, $9,900.00

how long does it take to earn $9,900.00? that is the point where it costs you more to chase this than
it's worth. that's the problem... oftentimes the person owing you knows better than you do where
most people will just walk away, and counts on it.

sometimes, they hope you will just sue them in small claims court... in the above scenario, they
don't even bother to respond, you get a $5k default judgement against them, and they send you
a check for $5k eventually, or when you chase them down and get it.

they just settled a $12,000 bill for $5,000.

Good job at eliminating that option. Until I brought it up there wouldn't have been much to shoot down. It certainly is apparent that he should just write it off an to much wasted time trying to collect, even though he does win either in small claims court or otherwise he is still left with collecting it.
It seams as if the general consensus is to not get his hopes up as he doesn't have a lot of recourse which is uplifting.
 

jim dungar

Moderator
Staff member
Location
Wisconsin
Occupation
PE (Retired) - Power Systems
It certainly is apparent that he should just write it off an to much wasted time trying to collect, even though he does win either in small claims court or otherwise he is still left with collecting it.

It is likely not a tax deductible 'bad-debt' until there is a court judgement.

I had a contractor stiff me for $10K work on my house. $800 in legal fees + 2hours of my time = $30K judgment. So, total cost turned out to be $10.8K which was tax deductible at about 27%. End result: only lost $6.8K, still have outstanding judgement, hope he wins the lottery
 

ritelec

Senior Member
Location
Jersey
It is likely not a tax deductible 'bad-debt' until there is a court judgement.

I had a contractor stiff me for $10K work on my house. $800 in legal fees + 2hours of my time = $30K judgment. So, total cost turned out to be $10.8K which was tax deductible at about 27%. End result: only lost $6.8K, still have outstanding judgement, hope he wins the lottery


??? from what I understood/understand....it's a write-off for an electrical supplier if he gets stiffed, but as a contractor, if you get stiffed your beat. ??? I'm guessing this was work to be done by a contractor for you, not
you contracting and getting duped.

Hope I never get stiffed for big donuts and have to find out.....................

I have a buddy that designs and installs fire training systems, did you know you can enter into a contract, I believe it was Iran...Irac.....,his company found out the hard way, and I think they let the guy go who put the package together,...
but, you HAVE to finish a project even if you did not receive one red cent..... they were + 100k into it with no payments, and by law.....they had to finish the job.
 

kwired

Electron manager
Location
NE Nebraska
It is likely not a tax deductible 'bad-debt' until there is a court judgement.

I had a contractor stiff me for $10K work on my house. $800 in legal fees + 2hours of my time = $30K judgment. So, total cost turned out to be $10.8K which was tax deductible at about 27%. End result: only lost $6.8K, still have outstanding judgement, hope he wins the lottery

Your loss for work on your own house is not the same as a loss for a business. If the loss is directly related to business activity it is a business expense, losses for long term investments could be different but we are talking about normal receipts and expenses here.

If you operate on a cash based accounting system you do not have a "bad debt" expense. You simply have no income to record for the incident, you still have (hopefully) paid your expenses related to the incident you just have no offsetting or profiting income related to the incident.

If you operate on an accrual based accounting system then you have recorded the income as soon as you generated a sales invoice, or other sales document. At some point if you decide you likely will not be paid you can expense what you have not been paid. If you later do receive some compensation then you will have to enter a sales receipt of some type for what has been received. It all works out eventually.
 

jim dungar

Moderator
Staff member
Location
Wisconsin
Occupation
PE (Retired) - Power Systems
If you operate on a cash based accounting system you do not have a "bad debt" expense. You simply have no income to record for the incident, you still have (hopefully) paid your expenses related to the incident you just have no offsetting or profiting income related to the incident.
But you can still go to court and get a judgement. An unpaid judgement can be treated as a 'bad debt loss' and it may be subtracted from your income, thus reducing your tax liability.


If you operate on an accrual based accounting system then you have recorded the income as soon as you generated a sales invoice, or other sales document. At some point if you decide you likely will not be paid you can expense what you have not been paid.
Most accountants would use 12 months (1 year) as the time frame.
 
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satcom

Senior Member
CNBC Documentary

CNBC Documentary

There is a good documentary on tonight about GC that stuffs everyone, banks, subs, homeowners,
 

Sparky555

Senior Member
I penned in a revision to their contract stating that full payment was due upon completion of the final punch list, dated with the project managers approval. Unfortunately they have not been prompt on any of their paperwork for us so now that we are at the end of the job I wanted to force the issue, and make sure we were covered. Further more, I thought I might even "threaten" taking this to their client (a very large cellular service provider, one that they are trying to impress) and let them know that this GC has not been following through on their paperwork

I scanned replies quickly so there may be a similar reply...I don't sign their contract, they sign mine. If you signed their contract you were probably screwed from the start. In my contract a missed payment stops work. Any penned revision must be signed by both parties.
 

jmellc

Senior Member
Location
Durham, NC
Occupation
Facility Maintenance Tech. Licensed Electrician
I worked for one co. where 1 of the guys was a bit rough & tough. It was said that the owner sent him to collect from difficult customers & he got results. Don't know the truth of it but it wouldn't surprise me. If that's what happened, I can't much blame the boss.
 

ritelec

Senior Member
Location
Jersey
I worked for one co. where 1 of the guys was a bit rough & tough. It was said that the owner sent him to collect from difficult customers & he got results.

Owed a lousy 800 bucks once. Four months later, I walked into the customers office and picked up his fax machine and started to walk out the door.........they called a BIG warehouse guy who escorted me out of the building (without the fax).
I waited 10 minutes outside the factory.................they cut a check.........never saw them again.
 
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