5 Tips For Avoiding Litigation In A Recession

Be Proactive -- Whether you are the debtor or the creditor, if non-payment issues arise, initiate communication and address them promptly. Do not allow the problem to continue to grow. Large problems are far more difficult to resolve than small ones.

Consider Alternatives Which Improve Your Position -- In an economic downturn, creative resolutions may be necessary, but can also provide an opportunity to improve your position. If you are owed money, for example, such resolutions may include a note secured by property, a payment plan with agreed provisions for interest and attorneys fees, or for a judgment in the event of default. If you are the debtor, a work-out could provide for more affordable installment payments and discount incentives for early payoff. This is also a prime opportunity to clearly document any agreements that are not in writing.

Evaluate Filing Suit -- In certain situations, filing suit is necessary. The law provides deadlines for filing different types of claims, which will be denied if not filed in time. Additionally, as a practical matter, a lawsuit may be required to bring uncooperative parties to the table. In the case of an unreasonable party or highly emotional issues, motions and other pre-trial options such as mediation, settlement conferences, or neutral case evaluations can often lead to resolution.

Consider Whether The Benefit Of Voluntary Action Outweighs The Cost Of Collection -- Obtaining a judgment is different than collecting one. A judgment is a court order deciding the merits of the case and the relief to which a party is entitled. If a monetary judgment is not voluntarily paid, enforcement procedures must be initiated and pursued by the judgment creditor. Additionally, appeal rights might delay collection of a judgment. In an economic downturn, the advantage of prompt voluntary payment may provide both an incentive to the plaintiff and leverage to the defendant in negotiating a potential discount or compromise. If the matter cannot be resolved, seek help from an attorney familiar with enforcement options and procedures.

Invest In Prevention -- Prevention is generally much less costly. In an economic downturn, many people try to save money by "doing it themselves." Litigation often arises from differing expectations and from the use of the Internet or other "cut and paste forms" that do not fit the particular situation or conform to applicable law. Consider investing once to create documents favorable to your business. Many documents, such as service contracts, notices, or mechanic's lien waivers, can be tailored to protect your interest and standardized for repeated use. Professional drafting and/or review of documents stating relationships and obligations can minimize the risk of time-consuming and costly litigation in the future.