Indiana Collections: Small Claim Debt Collection by Corporations

The old saying is that an attorney who represents himself has a fool for a client. Similarly, there is risk for anyone who chooses to represent themselves in litigation. But, the general rule is that an individual is entitled to represent him or herself. And, with small claims where the stakes are lower and the rules are more informal, self-representation might be a cost-effective approach that is worth the risk. However, with corporations or other business entities, the general rule is that they must be represented by an attorney. This makes a certain amount of sense since the corporation is not, itself, a human that can show up in court. As a practical matter, some individual will have to show up in court and represent the corporation. Because of the rules against the unauthorized practice of law, usually that is going to be an attorney.

There is, however, an exception in small claims cases where corporations can pursue a claim without using an attorney. If a corporation is pursuing a debt of less than $1,500, it can be represented by a designated full time employee of the corporate entity. Small Claims Rule 8(C) sets forth the requirements:

(3)    Corporate Entities, Limited Liability Companies (LLC’s), Limited Liability Partnerships (LLP’s). All corporate entities, Limited Liability Companies (LLC’s), and Limited Liability Partnerships (LLP’s) may appear by a designated full-time employee of the corporate entity in the presentation or defense of claims arising out of the business if the claim does not exceed one thousand five hundred dollars ($1,500.00). However, claims exceeding one thousand five hundred dollars ($1,500.00) must be defended or presented by counsel.

The rule goes on to warn that the corporate entity will be bound by any agreements relating to the small claims proceedings made by the designee and will be liable for any costs incurred by the employee, including those assessed for contempt against the employee.  Proceeding in this fashion means the corporate entity is waiving any part of the debt or claim that might exceed $1,500. Additionally, before a corporate designee can appear on behalf of the corporation, a corporate resolution must be on file with the court certifying compliance with Small Claims Rule 8, including an acceptance of the fact that the corporate entity is bound by the actions of the designee, will be responsible for assessments and costs levied by the court, and waives its rights with respect to amounts in excess of $1,500. Finally, the designated employee must have on file with the court an affidavit stating that he or she is not disbarred or suspended from the practice of law in Indiana or any other jurisdiction.

Under the right circumstances, this can be a very cost effective approach for a corporation collecting debts. However, be forewarned that a debt collection action can be derailed if the corporation is not represented by counsel and  your corporate employee has not been properly designated or if the corporation is seeking to collect amounts in excess of $1,500.

Have a collection matter in Lafayette or the surrounding counties that requires legal attention? Contact us.