What to Do If You Are Not Paid by a Client: A Guide for Contractors

As a contractor, your livelihood depends on timely and full payment for the services you provide.

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Unfortunately, situations where clients fail to pay are not uncommon, leaving contractors in a difficult position. If you find yourself in such a scenario, it's important to know your rights and the steps you can take to secure the payment you're owed. At LaWPASSPORT, we understand the challenges faced by contractors and are here to guide you through the process of dealing with non-paying clients.

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1. Review Your Contract: (Or have your attorney do it for you)

Before taking any action, review the contract you have with the client. Ensure that all terms regarding payment, deadlines, and deliverables are clearly outlined. Your contract is your primary source of protection and leverage in any dispute. Note any clauses related to late payments, penalties, or dispute resolution mechanisms.

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2. Communicate with the Client: (Or have your attorney do it for you)

Initiate a formal communication with the client regarding the unpaid invoice. Start with a polite reminder, as there might be a genuine oversight or misunderstanding. Clearly state the amount due, the original due date, and any agreed-upon terms regarding late payments. Keep a record of all communications for future reference.

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3. Send a Demand Letter: (Or have your attorney do it for you)

If informal communication does not resolve the issue, escalate the matter by sending a formal demand letter. A demand letter should be professional and concise, outlining:

• The details of the contract and services provided.
• The amount owed and the due date.
• Previous attempts to collect payment.
• A clear deadline for payment (typically 7-14 days from the date of the letter).
• A statement of intent to pursue legal action if payment is not received.

Sending a demand letter signals to the client that you are serious about collecting the debt and are prepared to take legal action if necessary.

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4. Consider Mediation or Arbitration: (Or have your attorney do it for you)

If the demand letter does not yield results, consider alternative dispute resolution methods such as mediation or arbitration. These methods can be less costly and time-consuming than going to court. Mediation involves a neutral third party helping both sides reach a mutually acceptable agreement. Arbitration, on the other hand, involves a binding decision from a neutral arbitrator.

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5. File a Small Claims Court Case: (Or have your attorney do it for you)

For smaller amounts owed, filing a case in small claims court is a viable option. Small claims courts are designed to handle disputes involving relatively low sums of money and typically do not require the representation of an attorney. Check the jurisdictional limits of small claims court in your area, as these limits vary by state.

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6. Engage a Collections Agency: (Or have your attorney do it for you)

If the amount owed is significant and the above steps have not been successful, consider hiring a collections agency. Collections agencies specialize in recovering unpaid debts but typically charge a fee or a percentage of the recovered amount. Be sure to understand the costs involved and choose a reputable agency.

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7. Consult an Attorney: Bingo

When all else fails, consulting an attorney may be necessary, especially for larger amounts or complex cases. An attorney specializing in contract law can provide advice tailored to your situation, help you navigate the legal system, and represent you in court if needed. At LaWPASSPORT, we offer expert legal services to help contractors secure the payments they are rightfully owed.

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Preventative Measures:

To minimize the risk of non-payment in the future, consider the following preventative measures:

• Require a deposit or partial payment upfront before starting work.
• Include clear payment terms and penalties for late payment in your contracts.
• Use project management tools to track work progress and deliverables.
• Maintain open and regular communication with clients throughout the project.

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Conclusion:

Dealing with non-paying clients is a challenging and frustrating experience for contractors. However, by following these steps and understanding your legal options, you can take effective action to recover the payment you are owed. At LawPassport, we are committed to supporting contractors in navigating these situations and ensuring their rights are protected. If you need legal assistance or advice on handling unpaid invoices, contact us today to learn how we can help.