How to Collect on a Debt: 5 Ways to Get Your Due
Maybe your sister totaled your car and won't pay for repairs, you contracted to rebuild your neighbor's fence and now they won't return your calls, or your college roommate stole your credit card and ran away to Tijuana. Whatever the case, you're owed a debt. How in the world do you go about collecting it?
There's plenty of ways to go about collecting what you're owed, from taking a gentle approach to pulling no punches. Here's five straightforward ways to collect on a debt, from least to most severe:
1. Send a Bill.
It may be obvious, but many people don't do it, particularly for personal debts owed by friends or family. A typical invoice should mention the amount of the debt, what it is for and how it is to be paid. Include a "payment due by" section, to let the debtor know that you have an exact deadline for being paid. This is a bit of an improvement on an email or text that just says "pay up."
2. Take Them to Small Claims Court.
For small debts, usually of just a few thousand dollars or less, you may consider small claims court. These courts don't require you to have a lawyer, take depositions, or submit lengthy legal briefs. Think more "Judge Judy" than "The Good Wife." After filing some paper work, you'll be assigned a court date. Be prepared to state your case -- have a solid understanding of just what happened, when it happened, and why you're owed exactly what you claim. Any supporting documents you have, such as invoices and copies of communication, should be brought with you on your court date.
3. Send it to an Agency.
Debt collection agencies do the work for you, for a hefty fee. Many collections agencies take around half of what is recovered. However, since they are able to dedicate themselves full time to recovering your debts, a collections agency may be an effective way to get back some of what you're owed.
4. Go to "Big Claims" Court.
For cases where you're owed a significant amount of money and haven't been able to recover, consider taking your debtor to state court. In these cases, you'll want to have representation, so contact a qualified lawyer. Oftentimes your lawyer may be able to recover your debts without having to go to trial.
5. File a Lien.
A lien is a notice attached (metaphorically) to your debtor's property that claims you are owed money. The owner must clear the lien, by contesting it in court or paying you back, before they are allowed to sell or refinance the property. In businesses like construction, liens are very common. Since, liens vary by type and jurisdiction, consider contacting a lawyer or doing extra research before attempting to file a lien.
- Inside the Dark, Labyrinthine, and Extremely Lucrative World of Consumer Debt Collection (The New York Times)
- Legal How-To: Collecting Money Owed to You (FindLaw's Law and Daily Life)
- Statute of Limitations for Debts Can Vary (FindLaw's Law and Daily Life)
- Debtors' Prisons Making a Comeback in America? (FindLaw's Law and Daily Life)