If your business is owed money

Know your deadline

You usually have five years to sue over an unpaid bill or broken contract. A signed, written promise to pay can allow ten years. A promissory note with a set due date can be enforced for ten years after that date. Once the deadline passes, only a new signed, written promise from the debtor brings the claim back.

Ask for interest

If no rate was agreed, Missouri allows nine percent a year. For an open account, interest starts once the bill is due and you have asked for payment. So send a written demand for payment.

Pick the right court

Claims of $5,000 or less, not counting interest and costs, can go to small claims court. See Missouri small claims court. Bigger claims go to circuit court.

After you win: collecting the judgment

Winning in court is only half the job. Missouri lets you collect from the debtor’s wages, bank accounts and money owed to the debtor. This is called garnishment. The law limits how much of a paycheck can be taken each week. The limit is the smallest of these:

• 25 percent of take-home pay;
• the amount of take-home pay above 30 times the federal minimum hourly wage;
• 10 percent, if the worker is a Missouri resident who supports a family.

Some property is protected from collection. For example, household goods up to $15,000 in total value and vehicles up to $5,000 are protected, among other things. A judgment is treated as paid after ten years unless it is renewed or a payment is recorded. So long collections need to stay on a calendar.

If you have been sued over a debt

Read the court papers first. They give you either a deadline to file a written answer or a date to appear. In circuit court, you usually have 30 days after you are served to answer. Many debt cases are in a simpler court, and the papers will tell you what to do. Either way, if you ignore them, the other side will likely win by default.

Defenses to check in every case:

• Too late. The other side may have missed its deadline to sue. You must raise this in your answer.
• Wrong owner. A company that bought your debt must prove it owns the account.
• Wrong amount. The balance, interest and fees must be backed by the contract and records.
• Requests to admit. In circuit court, not answering these on time counts as agreeing. In the simpler court, the judge decides what happens instead.

Federal rules for debt collectors

A federal law, the Fair Debt Collection Practices Act, limits what debt collectors can do. It covers personal debts, meaning debts for personal, family or household purchases. A “debt collector” is a business whose main work is collecting debts, or that regularly collects debts owed to someone else. A store collecting its own bills in its own name usually is not covered.

• A written notice. Within five days after first contacting you, the collector must send a written notice. It must list the amount and who is owed. It must say you have 30 days to dispute the debt. If you dispute it in writing within 30 days, the collector must stop until it proves the debt.
• No lies or false threats. A collector cannot lie about what you owe. It cannot threaten action it cannot legally take.
• What you can recover. Your actual losses, up to $1,000 more in an individual case, and your legal fees if you win.

Business owners: does this federal law apply to you?

If your business collects its own bills in its own name, you are usually not a “debt collector” under this law. Business-to-business debts are not covered either. But collection agencies and companies that buy personal debts are covered. If you hand personal accounts to a third party, or collect under another name, have your process reviewed.

Common questions

Related reading

• Civil litigation overview
• Breach of contract
• Missouri small claims court
• Contract drafting and review