To collect a debt, you confirm your right to sue is still open, put the amount and the agreement on paper, send a written demand, try to settle, and — if that fails — file a lawsuit and use the resulting judgment to garnish wages, levy bank accounts, or lien real estate. Each step builds the record for the next one, and skipping the written demand tends to weaken everything that comes after it.
Confirm the Clock Has Not Run Out
Every debt has a statute of limitations. Once it expires, you lose the right to sue even if the money is plainly owed. Written contracts generally give you somewhere between three and fifteen years to file, with six years being the most common. Oral agreements and open accounts like credit cards usually have shorter windows. The clock typically starts on the date of the last missed payment or the date the debtor breached the agreement.
Some events restart or pause that clock. In many states, a partial payment or a written acknowledgment of the debt restarts the limitations period from that date. The clock may also be tolled while the debtor is on active military duty, during a pending bankruptcy, or in some states while the debtor lives out of state. Check the deadline that applies in your state before spending anything on filing fees. Filing on a time-barred debt wastes money and can invite counterclaims.
Pull Together the Documents and the Math
Your collection effort is only as strong as the file you build before sending a single letter. At a minimum you want the signed contract or agreement, invoices showing the balance, and proof you delivered the goods or performed the services. If the debt came from a sale of goods worth $500 or more, you generally need a written agreement to enforce it in court under the Uniform Commercial Code’s Statute of Frauds.1Cornell Law Institute. Uniform Commercial Code (UCC) 2-201 – Statute of Frauds
Keep every email, text, voicemail, and phone note that shows the debtor knew about the balance. Add the unpaid principal to any contract-authorized interest to reach a total. If your contract lets you recover collection costs or attorney fees, track that figure separately so you can ask the court to add it to the judgment. Getting the math right now prevents delays if the debtor disputes the amount later.
Send a Demand Letter
A formal demand letter is the debtor’s last chance to resolve things before you file, and it becomes evidence that you tried. 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 payment proposal. Include specific instructions for how to pay.
Send it by certified mail, return receipt requested. The signed receipt prevents the debtor from later claiming they never got notice. Say plainly that you intend to file suit if payment is not received by the deadline. A direct, professional tone produces better results than an aggressive one, and a solid demand letter often triggers a settlement offer before you spend anything on court fees.
Consider Settling
Between the letter and the courthouse there is real room to negotiate. Many debtors who can’t write a lump-sum check will agree to a structured plan or a discounted payoff. Settling for less can make sense when filing fees, your time, and enforcement costs would eat into what you’d actually collect on a full judgment, especially for smaller debts.
When you weigh an offer, compare it to the realistic cost and probability of collecting through litigation. Put any deal in writing before accepting a dollar: total amount, payment schedule, and a clear line stating that completion of the payments satisfies the debt in full. Take partial payment without a written settlement and the debtor can later argue the rest was forgiven. The Consumer Financial Protection Bureau recommends both parties keep copies of any repayment or settlement agreement.2Consumer Financial Protection Bureau. How Do I Negotiate a Settlement With a Debt Collector?
File the Lawsuit
If the demand is ignored and negotiations go nowhere, file a civil suit. You submit a complaint and summons with the clerk of court in the jurisdiction where the debtor lives or where the transaction took place. The clerk assigns a case number and sets an initial date. Filing fees vary widely, from roughly $30 for a small claims case to several hundred dollars for larger civil filings.
Small Claims Court
If the amount falls below your state’s small claims cap, this route is faster and cheaper, and you don’t need an attorney. State ceilings range from $2,500 to $25,000. You fill out a short form, pay a modest fee, and present your case directly to a judge, usually within a few weeks. A small claims judgment carries the same enforcement weight as any other civil judgment.
Regular Civil Court
For anything above the small claims limit, you file in general civil court, sometimes called district or superior court. You draft a complaint laying out the facts and the legal basis for the debt. If your contract includes an attorney-fee clause, ask the court to add legal costs to the judgment; without one, most jurisdictions make each side pay its own lawyer.
Serve the Debtor and Get a Judgment
After filing, the debtor has to be formally notified through service of process. A professional process server or the local sheriff delivers the summons and complaint at the debtor’s home or workplace and files proof of service with the court.
Once served, the debtor has a limited window to file a written response. State deadlines vary but commonly fall between 20 and 30 days. If nothing is filed, you can ask the court for a default judgment: an order granting the full amount claimed without a trial. You file a motion showing proper service and no response, the judge reviews the evidence, and if it checks out, the court enters judgment in your favor.
If the debtor does answer, the case moves into standard litigation, which can include discovery, settlement conferences, and possibly a trial. Many contested debt cases settle once the debtor sees the strength of the documentation.
Find Out Where the Money Is
A judgment on paper is not money in your account. Before you can enforce, you need to know what the debtor has and where. Federal Rule of Civil Procedure 69 lets a judgment creditor use the full range of discovery tools, including depositions and document requests, to locate the debtor’s assets.3Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution Most states offer an equivalent procedure, often called a debtor’s examination, in which the court orders the debtor to appear and answer questions under oath about income, bank accounts, real estate, and other property.
A debtor who ignores a court-ordered examination can be held in contempt. You can also subpoena banks and employers directly to confirm balances and wages. Thorough asset discovery keeps you from spending money on levy or garnishment orders that won’t produce anything.
Enforce the Judgment
With a judgment in hand, you can ask the court for a writ of execution — an order directing law enforcement to seize the debtor’s non-exempt assets to satisfy the debt.3Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution From there, the practical tools are wage garnishment, bank account 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, which is $7.25 per hour in 2026 and produces a protected floor of $217.50 per week.4Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment5U.S. Department of Labor. State Minimum Wage Laws In practice, if a debtor’s weekly disposable pay is $500, the maximum garnishment is $125. If it’s $250, the cap drops to $32.50, the smaller number produced by the second formula. Some states set stricter caps that further limit what you collect each pay period. The employer has to comply with the garnishment order or face liability for the unpaid amount.
Bank Account Levies
A bank levy lets the sheriff or marshal freeze and pull funds directly from the debtor’s checking or savings accounts. You give the court the debtor’s bank information, gathered during asset discovery, and the court issues a levy order to the institution. Unlike garnishment, a levy can produce a lump-sum recovery if the account holds enough to cover the judgment. The bank usually holds the funds for a short waiting period, often a couple of weeks, before releasing them, to give the debtor time to claim any exemptions.
Property Liens
Recording a judgment lien against the debtor’s real estate blocks them from selling or refinancing without paying you first. You file the judgment with the county recorder’s office in any county where the debtor owns property. The lien attaches to the title and stays there for a set number of years, which varies by state. It doesn’t produce cash right away, but it secures your claim so you get paid whenever the property changes hands.
What You Can’t Touch
Not everything the debtor owns is available. Federal law shields certain income and assets, and state exemptions often protect more.
- Social Security benefits are protected from garnishment, levy, or attachment for most private debts.6Office 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 get significant federal protection. In bankruptcy, IRA balances are exempt up to roughly $1.7 million, adjusted periodically.7Office 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 their primary residence under a homestead exemption. Protected amounts vary widely.
If the debtor’s only income comes from protected sources, your enforcement options shrink fast. Confirm what is exempt before spending money on a levy or garnishment.
Keep the Judgment Alive
Judgments don’t last forever. Depending on the state, they expire after as few as five years or as many as twenty if not renewed. Most states let you renew by filing an affidavit or motion before the expiration date, which extends the judgment for another full term. Miss the deadline and you can lose the right to enforce entirely, so mark the expiration date the day the judgment lands.
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 entry of judgment, compounded annually.8Office of the Law Revision Counsel. 28 U.S. Code 1961 – Interest State rates run from around 4 percent to as high as 17 percent, often tied to a market benchmark. That accrual gives some debtors a reason to pay sooner rather than later.
When the Debt Is Truly Uncollectible
If you eventually conclude the debt can’t be collected and decide to write it off, tax rules matter on both sides. As a creditor, you may be able to claim a business bad debt deduction, but 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 it won’t be paid. Cash-method businesses generally can’t deduct a bad debt for money they never received.9Internal Revenue Service. Tax Guide for Small Business You have to show reasonable collection efforts before writing it off.
On the reporting side, canceling $600 or more of debt may require you to file IRS Form 1099-C. That obligation applies to financial institutions, credit unions, and entities whose significant trade or business is lending money.10Internal Revenue Service. Instructions for Forms 1099-A and 1099-C The canceled amount becomes taxable income to the debtor, which is one more reason some debtors prefer settling to having a debt formally canceled.