To collect a debt someone owes you, confirm the statute of limitations has not run, gather your written proof, send a certified demand letter, negotiate a settlement if you can, and — if the debtor still refuses — file suit, obtain a judgment, and enforce it through wage garnishment, a bank levy, or a property lien. Each step builds on the one before it, and skipping the paper trail early on makes every later step harder.
Confirm You Still Have Time to Sue
Every debt has a filing deadline called the statute of limitations. Once it expires, you lose the right to sue even if the debtor plainly owes you money. Written contracts run roughly three to fifteen years depending on the state, with six years being the most common. Oral agreements and open accounts like credit cards usually have shorter windows. The clock generally starts on the date of the last missed payment or the date the debtor breached the agreement.
Certain events pause or restart it. In many states, a partial payment or a written acknowledgment of the debt restarts the clock from that date. The period can also be tolled while the debtor is on active military service, while a bankruptcy is pending, or in some states while the debtor lives out of state. Filing on a time-barred debt wastes filing fees and can invite counterclaims, so check your state’s rule before you spend anything.
Gather Your Documentation
A strong case rests on the paper you assemble before you send anything. At a minimum, pull together the signed contract or agreement, the invoices showing the amount owed, and proof that you delivered the goods or completed the services. For a sale of goods worth $500 or more, the Uniform Commercial Code’s Statute of Frauds generally requires a written agreement to enforce the deal in court.1Cornell Law Institute. Uniform Commercial Code (UCC) 2-201 – Statute of Frauds Service contracts and loan agreements fall under separate state rules, but a signed writing is always stronger than an oral promise.
Keep a log of every communication with the debtor: emails, texts, voicemails, and notes from phone calls. Those records show the debtor knew about the balance and had chances to pay. Then do the math. Add the unpaid principal to any interest the contract allows. If the contract lets you recover collection costs or attorney fees, calculate that figure separately so you can claim it later. Precise numbers up front prevent delays if the debtor challenges the total in court.
Send a Demand Letter
A formal demand letter is the debtor’s last chance to pay before you sue, and it becomes evidence that you tried to resolve the matter out of court. State the exact amount owed, describe the underlying agreement, and set a firm deadline — commonly 10 to 30 days — for payment in full or a proposed payment arrangement. Include clear payment instructions, whether that is a mailing address for a cashier’s check or wire details.
Send it by certified mail with a return receipt requested. The signed receipt proves the debtor got the letter, which forecloses any later claim that they never knew about the balance or the threat of suit. Close by stating you will file a lawsuit if payment is not received by the deadline. A direct, professional tone tends to produce better results than aggressive language, and a well-drafted demand often prompts a settlement offer before you spend a dollar on filing fees.
A note on scope: if you hire a collection agency rather than collecting the debt yourself, the federal Fair Debt Collection Practices Act imposes extra requirements on that agency, including a written validation notice within five days of first contact.2Office of the Law Revision Counsel. 15 USC 1692g – Validation of Debts The FDCPA generally applies to third-party debt collectors, not to original creditors collecting their own debts, though some states extend similar rules to original creditors.
Consider Settling Before Court
Between the demand letter and the courthouse, there is room to negotiate. Many debtors who cannot pay in a lump sum will agree to a payment plan or a reduced payoff. Taking less than the full amount can make financial sense if the alternative is months of litigation with no guarantee you collect more. Filing fees, attorney time, and enforcement costs all erode the value of a judgment, especially on smaller debts.
Weigh any offer against the realistic likelihood and cost of collection through litigation. Before accepting a deal, put the terms in writing: total amount, payment schedule, and a clear statement that the agreement satisfies the debt in full once completed. Accept partial payment without a written settlement and the debtor may later dispute whether the remainder is still owed. The Consumer Financial Protection Bureau advises both parties to keep copies of any repayment or settlement agreement.3Consumer Financial Protection Bureau. How Do I Negotiate a Settlement With a Debt Collector?
File a Lawsuit
When the demand letter is ignored and negotiations fall apart, file a civil lawsuit. Submit a complaint and summons at the clerk of court’s office in the jurisdiction where the debtor lives or where the transaction took place. The clerk assigns a case number and sets an initial court date. Filing fees vary widely — anywhere from roughly $30 for small claims to several hundred dollars for larger civil cases.
Small Claims Court for Lower-Value Debts
If the amount falls below your state’s small claims threshold, small claims court is usually faster, cheaper, and does not require an attorney. Maximum limits range from $2,500 to $25,000 depending on the state. You fill out a short form, pay a modest filing fee, and present your case directly to a judge, typically within a few weeks. Small claims judgments carry the same enforcement power as any other civil judgment.
Regular Civil Court for Larger Debts
For debts above the small claims limit, file in general civil court (sometimes called district or superior court). The process is more formal. You draft a complaint laying out the facts and legal basis for the debt, file it with the clerk, and pay the applicable fee. If your contract includes an attorney-fee clause, you can ask the court to add your legal costs to the judgment; without one, each side usually pays its own attorney fees.
Serve the Debtor and Get a Judgment
After filing, the debtor must be formally notified through service of process. A professional process server or the local sheriff delivers a copy of the summons and complaint to the debtor at home or work. You pay the service fee upfront, and the server files a proof-of-service document with the court confirming delivery.
Once served, the debtor has a limited window to file a written response. In federal court that window is 21 days.4Legal Information Institute. Federal Rules of Civil Procedure Rule 12 – Defenses and Objections State deadlines vary, commonly falling between 20 and 30 days. If the debtor does not respond in time, you can ask the court for a default judgment — an order granting the full amount claimed without a trial. You file a motion showing the debtor was properly served and did not answer. The judge reviews your evidence and, if everything checks out, enters judgment in your favor.
If the debtor answers, the case moves through standard litigation: discovery, possibly settlement conferences, and potentially a trial. Many debt cases still settle before trial once the debtor sees the creditor has solid documentation.
Find the Debtor’s Assets
A judgment does not automatically put money in your pocket. Before you can use any enforcement tool, you have to know where the debtor’s money and property are. Federal Rule of Civil Procedure 69 lets a judgment creditor use the full range of discovery tools — depositions, document requests — to locate assets.5Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution Most states have a parallel procedure, often called a debtor’s examination or supplemental proceeding, in which the court orders the debtor to appear and answer questions under oath about income, bank accounts, real estate, and other property.
If the debtor skips a court-ordered examination, the judge can hold them in contempt. You can also subpoena banks and employers directly to confirm balances and wages. Thorough asset discovery before you choose an enforcement method saves time and money by directing effort where recovery is most likely.
Enforce the Judgment
With a judgment in hand, ask the court to issue a writ of execution — a court order directing law enforcement to seize the debtor’s non-exempt assets to satisfy the debt.5Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution The main tools are wage garnishment, bank levies, and property liens.
Wage Garnishment
Wage garnishment redirects part of the debtor’s paycheck to you until the judgment is paid. Federal law caps the amount at the lesser of two figures: 25 percent of the debtor’s weekly disposable earnings, or the amount by which those earnings exceed 30 times the federal minimum wage ($7.25 per hour in 2026, making the protected floor $217.50 per week).6Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment7U.S. Department of Labor. State Minimum Wage Laws If the debtor’s weekly disposable pay is $500, the maximum garnishment is $125. If disposable pay is only $250, the limit drops to $32.50 ($250 minus $217.50), because that yields the smaller figure. Some states set lower caps, so state law may further reduce what you collect per paycheck. The debtor’s employer must comply with the order or face potential liability for the unpaid amount.
Bank Account Levies
A bank levy lets the sheriff or marshal freeze and seize funds directly from the debtor’s checking or savings accounts. You give the court the bank information you gathered in asset discovery, and the court issues a levy order to the financial institution. Unlike garnishment, which trickles in over time, a levy can produce a lump-sum recovery if the account balance covers the judgment. The bank typically holds the funds for a short waiting period — often a couple of weeks — before releasing them, giving the debtor time to claim any exemptions.
Property Liens
Recording a judgment lien against the debtor’s real estate blocks a sale or refinance until you are paid. File the judgment with the county recorder’s office in any county where the debtor owns property. The lien attaches to the title and remains for a set number of years, depending on state law. It does not put cash in your hands immediately, but it secures your claim so you get paid whenever the property changes hands.
What You Cannot Touch
Not everything the debtor owns is fair game. Federal law shields certain income and assets from seizure, and state exemptions can protect more.
- Social Security benefits are generally off-limits to garnishment, levy, or attachment for private debts.8Office of the Law Revision Counsel. 42 U.S. Code 407 – Assignment of Benefits
- VA disability and pension payments are generally exempt from seizure for private debts.
- Funds in 401(k) plans, IRAs, and similar tax-qualified retirement accounts receive significant federal protection; in bankruptcy, IRA balances are exempt up to approximately $1.7 million (adjusted periodically).9Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
- Federal and state disability payments and unemployment compensation are typically exempt.
- Most states protect a portion of the debtor’s equity in a primary residence through a homestead exemption, though the protected amount varies widely.
If the debtor’s only income comes from protected sources, your enforcement options narrow considerably. Confirming what is exempt before you pay for levy or garnishment proceedings prevents wasted effort.
Keep Your Judgment Alive
Judgments do not last forever. Depending on the state, they expire after as few as five years or as many as twenty if not renewed. Most states allow renewal by filing an affidavit or motion with the court before the expiration date, which extends the judgment for another full term. Miss the renewal deadline and you can lose the right to enforce entirely, so mark the expiration date the day you receive the judgment.
While the judgment is active, post-judgment interest accrues on the unpaid balance. In federal court, the rate equals the weekly average one-year Treasury yield from the week before the judgment was entered, compounded annually.10Office of the Law Revision Counsel. 28 U.S. Code 1961 – Interest State courts set their own rates, ranging from around 4 percent to as high as 17 percent, often tied to a market benchmark. Interest gives some debtors a reason to pay sooner rather than watch the balance grow.
If You Have to Write It Off
If the debt turns out to be uncollectible, there may still be a tax angle for you as the creditor. A business bad debt deduction on your federal return is available only if the amount was previously included in your gross income. Businesses using the accrual method can deduct the unpaid amount once it becomes clear the debt will not be paid. Businesses using the cash method generally cannot deduct a bad debt for money they never received in the first place.11Internal Revenue Service. Tax Guide for Small Business To support the deduction, you need to show reasonable collection efforts before writing the debt off — one more reason the demand letter, service records, and post-judgment attempts you built along the way matter.