When someone owes you money and won’t pay, the path to getting it back runs in a specific order: confirm you’re still within the deadline to sue, gather your proof, send a written demand, try to settle, and if none of that works, file in small claims court and use post-judgment tools to actually collect. Skipping steps or taking them out of order is how valid claims get lost. Rules vary by state, so check your local court’s procedures before filing anything.
Check Your Deadline to Sue
Every state puts a time limit on suing over an unpaid debt. This is the statute of limitations, and once it expires you lose the right to sue no matter how airtight your evidence is. For written agreements the window runs roughly 3 to 15 years depending on the state. Oral agreements usually get a shorter window, sometimes as little as 2 years. Missing this deadline is the most common way people forfeit an otherwise valid claim.
The clock typically starts on the date payment was due or on the date of the last payment. Partial payments and written acknowledgments of the debt can restart it entirely in many states, giving you a fresh limitations period. That can help if the debtor recently paid something, but it also means you shouldn’t pressure someone into a token payment just to reset the clock unless you understand how your state treats that situation.
Pull Together Proof of the Debt
Before you do anything formal, assemble every record that shows the debt exists and how much is owed. Written contracts, loan agreements, and signed promissory notes carry the most weight because they spell out what was promised. Invoices, purchase orders, and account statements fill in services performed or goods delivered.
Digital communications matter just as much. Save emails, texts, and any social media messages where the debtor talked about the debt or acknowledged it. Bank statements showing a cleared check or a direct transfer create a money trail that’s difficult to dispute. Records of any partial payments do double work: they prove the debt existed and show the debtor knew about it.
Verbal agreements are enforceable in most situations but harder to prove. You’ll need to show both sides agreed to specific terms, and evidence that you performed the work or delivered the goods helps. Witnesses who were present when the agreement was made can support your account. The weaker your paper trail, the more carefully you should document every interaction from here on.
Send a Written Demand Letter
A demand letter is your formal notice that the debt is overdue and that you’ll take legal action if it isn’t paid. It also creates a record that you tried to resolve the matter before suing, which judges notice. Keep the tone professional and factual.
The letter should identify both parties by full name and contact information, state the exact amount owed and briefly explain how the debt was incurred, give a payment deadline (10 to 14 days from receipt is standard), and state plainly that you’ll pursue legal remedies if the deadline passes without payment. Send it by certified mail with return receipt requested so you can prove delivery, and keep copies of everything. Mailing a second copy by regular mail is a sensible backup.
Try to Settle Before Court
Not every dispute needs a courtroom. If the debtor admits owing the money but says they can’t pay the full amount, a negotiated settlement can save months of effort. People often accept 50 to 80 cents on the dollar when the alternative is a drawn-out lawsuit with uncertain collection prospects at the end.
If you reach an agreement, get it in writing before accepting any money. The written agreement should state the total the debtor will pay, the payment schedule, and a clear line that the payment satisfies the debt in full. Without that document, you can end up fighting over whether a partial payment was meant as full settlement or just a down payment, and a handshake deal that falls apart leaves you worse off than before.
File in Small Claims Court
When the demand letter and any negotiation produce nothing, small claims court is built for this situation. These courts handle monetary disputes with simplified procedures, and you can represent yourself without a lawyer. Every state caps the amount you can sue for in small claims, with limits ranging from $2,500 to $25,000 depending on where you file. Check your local court’s limit before proceeding.
Starting the Case
Get the correct form from your local court’s website or clerk’s office. It asks for your information, the debtor’s name and address, the amount owed, and a short description of why. File it with the clerk and pay the filing fee. Fees vary by jurisdiction and claim amount, typically $30 to $75 for smaller claims and higher for larger ones.
The court will issue a summons, and you’re responsible for formally notifying the debtor. This is service of process, and most courts require someone other than you to handle it, such as a sheriff’s deputy or private process server. Service fees usually fall in the $40 to $100 range. If the debtor can’t be located or avoids service, the case stalls, so a current address matters.
Mediation and the Hearing
Many courts offer or require mediation before trial. A neutral third party tries to help you and the debtor reach an agreement; if it works, you walk away with a binding settlement and no hearing. If it doesn’t, the case moves to trial.
At the hearing, bring every piece of evidence you’ve gathered: contracts, messages, bank statements, photos, and any witnesses. Present your case clearly and chronologically. Small claims judges hear dozens of cases a day, so organized and concise beats dramatic. If the judge rules in your favor, you get a judgment for the amount owed.
Collecting After You Win
Winning doesn’t put money in your account. The court won’t collect for you. If the debtor doesn’t pay voluntarily, enforcement is entirely on you, and this is where most people get discouraged. Several legal tools can help.
Wage Garnishment
Wage garnishment lets you take a portion of the debtor’s paycheck directly from their employer. You go back to court for a garnishment order, which gets served on the employer, who then withholds part of the debtor’s pay and sends it to you until the judgment is satisfied. Federal law caps garnishment at 25% of the debtor’s disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever yields the smaller garnishment.1Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment Some states impose tighter limits. Garnishment doesn’t work if the debtor is self-employed or paid in cash.
Bank Levy
A bank levy lets you seize funds directly from the debtor’s bank account. It also requires a court order, and you need to know where the debtor banks. The levy captures only what’s in the account when the bank processes the order, so timing and knowledge of the debtor’s banking habits matter. If the account is empty or holds only exempt funds like Social Security benefits, you come up short.
Property Lien
Filing an abstract of judgment with the county recorder’s office puts a lien on the debtor’s real estate. It doesn’t pay you immediately, but it blocks the debtor from selling or refinancing without paying off your judgment first. If the debtor owns a home and will eventually sell, this is one of the most effective long-term tools available.
Debtor’s Examination
When you don’t know where the debtor’s money is, you can ask the court to compel a debtor’s examination. The debtor appears under oath and answers questions about income, bank accounts, real estate, vehicles, and other assets, and can be required to bring documents like pay stubs and bank statements. What you learn tells you which collection tool to use next. If the debtor fails to appear, the court can issue a bench warrant.
Interest and Renewal
A judgment doesn’t sit still. Most states add interest to the unpaid balance from the date the judgment is entered, commonly between 6% and 12% a year depending on the state, and that interest accrues automatically. Judgments typically last around 10 years, but most states let you renew before expiration, which keeps your right to collect alive as long as you stay on top of the paperwork.
If the Debtor Files Bankruptcy
A bankruptcy filing triggers an automatic stay that halts almost all collection activity the moment the petition is filed. Any wage garnishment, bank levy, or lawsuit in progress must stop immediately.2Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay Violating the stay can bring sanctions against you.
Whether you ultimately get paid depends on the type of bankruptcy and the nature of the debt. Many unsecured personal debts get discharged, meaning the debtor is legally released and you collect nothing. Some debts survive. If the debtor obtained the loan through fraud, false pretenses, or a materially false written statement about their finances, you can challenge the discharge. Debts resulting from willful and malicious injury are also nondischargeable.3Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge Proving these exceptions requires filing a separate action in the bankruptcy court, which is complex enough that an attorney is worth consulting.
Rules You Have to Follow While Collecting
The urge to call repeatedly, show up at the debtor’s workplace, or tell their friends about the debt is understandable. Resist it. The federal Fair Debt Collection Practices Act technically applies to third-party collectors rather than original creditors collecting their own debts, but most states have their own unfair and deceptive practices laws that can reach anyone trying to collect, including you.4Consumer Financial Protection Bureau. What Laws Limit What Debt Collectors Can Say or Do?
As a practical matter, avoid contacting the debtor before 8 a.m. or after 9 p.m., posting about the debt on social media, contacting them at work if you know the employer prohibits personal communications, and making threats you don’t intend to carry out. Harassment can expose you to a countersuit that costs more than the original debt. Keep every interaction professional, documented, and focused on resolution.
Writing Off a Debt You Can’t Collect
If you’ve exhausted your options and the debt is genuinely uncollectible, you may be able to deduct it as a nonbusiness bad debt on your federal tax return. The IRS treats it as a short-term capital loss, reported on Form 8949.5Internal Revenue Service. Topic No. 453, Bad Debt Deduction
The requirements are specific. The debt must be completely worthless, not just partially uncollectible. You must have intended the transaction to be a loan, not a gift, so money handed to a relative with an unspoken understanding they might never repay doesn’t qualify. You also need to show you took reasonable steps to collect, though you don’t necessarily need a court judgment if you can demonstrate one would be uncollectible anyway.
To claim the deduction, attach a statement to your return describing the debt, the amount and due date, the debtor’s name and your relationship, the efforts you made to collect, and why you concluded the debt was worthless.5Internal Revenue Service. Topic No. 453, Bad Debt Deduction You can take the deduction only in the year the debt becomes worthless, so don’t wait. For a sum large enough to meaningfully affect your return, a tax professional is worth the cost.