Big change made to small claims actions

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Debt collection is just a part of running a business for Joan Ballweg, who owns a John Deere dealership in Waupun.

Hiring an attorney to collect that debt is a step Ballweg, who also is a state representative, said she tries to avoid. But attorney fees weren’t always easy to sidestep when the state capped small claims actions at $5,000, meaning anything more than that would force the case into the more legally complicated large claims court.

So sometimes, Ballweg said, even if the debt was for $6,000 or $7,000, she would file in small claims court and only try to collect $5,000.

“I didn’t want to take the case to an attorney and know I could lose about one-third in fees,” said Ballweg, R-Markesan. “I’m better off settling for a lower amount so I could do it myself.”

But settling for less money did not mean she was willing to settle when she put on her lawmaker’s hat. Since 2005, Ballweg has pushed to increase the small claims cap to $10,000. She said she didn’t do it to push people away from hiring attorneys, but rather to account for inflation and to bring Wisconsin in line with neighboring states.

Wisconsin had a $5,000 limit since 1995. Illinois has a $10,000 limit, and Minnesota is at $7,500.

Ballweg hit her $10,000 goal when Gov. Scott Walker signed the 2011-13 state budget. The change, which took effect July 1, does not apply to third-party complaints, personal injury claims or tort claims, which remain at $5,000 or less to qualify as a small claims action.

Now attorneys are trying to figure out what that means. Lawyers who do bulk debt collections and other small claims work say they don’t expect a dramatic shift, but they acknowledge more businesses will try to file and manage claims in-house.

The cost of filing a small claims case in circuit court is $94.50, compared to $265.50 for other civil cases.

“Small claims court is less intimidating,” said Tristan Pettit, of Petrie & Stocking SC, Milwaukee, who represents landlords in small claims evictions. “While you are dealing with the same issues, the belief can be, ‘I can handle this myself.’”

But that does not make the cases easy, said West Allis debt collection lawyer Randy Wynn. Even with the increased limit, he said, he is skeptical that a significant number of businesses will spend the time to bring small claims cases instead of hiring a lawyer.

“Some businesses might choose to be doing it on their own,” Wynn said, “but it can be cumbersome.”

In a contested case, the process involves a minimum of four court appearances, he said, and it might not be worth it for some smaller companies.

“Is your time worth it?” he said. “Keep in mind if you get a judgment, then what? You still have to collect it.”

Last year, Milwaukee County disposed of more than 43,000 small claims cases, and more than 30,000 of those were contract disputes and collections. Jim Smith, chief deputy clerk of court, said those numbers will grow in 2011.

The court is working to draft pamphlets to explain the changes to pro se litigants, he said.

The majority of the increase could come from collections actions, Smith said, especially from businesses.

“I think a lot of small businesses wanted this,” he said, “because when trying to collect $7,000, they didn’t want to hire a lawyer. So they would settle for $5,000 of what was owed.”

Now they have a chance to recover the entire amount up to $10,000 without having to file it as a large claim. Smith said some claims still will result in default judgments, but with more money at stake, there is a higher likelihood people will contest claims.

“That’s where we can possibly see lengthier adjournments and doing more contested hearings in front of commissioners,” he said. “There are only so many slots in a day.”

Still, the change gives businesses such as Ballweg’s more freedom, she said.

“Most of those cases are pretty straightforward,” Ballweg said. “I think this gives parties a good outlet without having to go into major circuit court filings.”

Jack Zemlicka can be reached at [email protected].