Question. I am supplier who has not received payment for the materials I furnished on a construction project. I am concerned that I may spend more on collection than the amount already due. Can I recoup the costs of collection if I sue?
“Costs of collection” is a broad term which may encompass attorneys’ fees, court fees, and other miscellaneous expenses (e.g. photocopies, process server fees, etc.) Court fees and some miscellaneous expenses may be added to the principal amount due at the time judgment is entered by the court. Often, these costs are preset by statute and are presented to the court for approval as part of the proposed judgment in what is called a “Bill of Costs”. Rarely does the Bill of Costs amount equal the actual “out-of-pocket” expenses incurred by the judgment creditor.
Attorneys’ fees can only be recouped if your agreement with the debtor specifically provides that the debtor will be responsible for attorneys’ fees if the matter goes to collection. In the event your agreement contains such a clause, it may provide that attorneys’ fees are calculated as a percentage of the sum due. Some courts will accept this calculation, but others may require you to provide proof of the actual amounts expended. In any event, the court may reduce the amount you request for attorneys’ fees if it deems the fees to be unreasonable.
Ultimately, the lesson to be learned is that everyone is a potential “judgment creditor.” The first line of defense is to have an attorney look over your agreements to make sure they contain all the protections afforded by the law, thereby maximizing the likelihood of payment in full.