What to Do When Someone Doesn’t Pay You Back

It can be deeply frustrating when someone owes you money and fails to repay it. The uncertainty of how to proceed, coupled with the financial strain, can create significant challenges. Navigating such a situation requires a clear understanding of the steps available to recover the funds owed. This process often involves a series of actions, beginning with organized information gathering and potentially escalating to formal legal procedures.

Gathering Information and Initial Steps

When an unpaid debt surfaces, the first step involves gathering and organizing relevant documentation. This includes:
Written agreements, such as promissory notes or loan agreements, outlining the debt terms.
Digital communications like text messages or emails discussing the loan or repayment.
Records of bank transfers or checks exchanged, proving the initial transaction and any partial payments.
Invoices for services rendered or shared expense breakdowns.

Understanding the debt’s nature, whether from a personal loan, services, or shared obligation, is important. Organizing this information systematically in a chronological file creates a clear timeline of events and the precise amount owed. This record is invaluable for future communication or legal proceedings.

Following documentation, informal communication attempts are a sensible next step. This involves polite reminders through phone calls or messages, reiterating the outstanding amount and expected repayment date. Document every interaction, including dates, times, and content. This log accounts for efforts to resolve the matter amicably before considering formal actions.

Sending a Formal Demand

Should informal attempts prove unsuccessful, a formal demand letter is the next step. This document serves as official notice of the outstanding obligation. The letter must state the exact amount owed and the debt’s basis, referencing gathered documentation. It should also include a specific deadline for payment, typically 7 to 14 days.

The letter should state the intent to pursue further action if the deadline is not met, serving as a warning. Send the letter via certified mail with a return receipt requested to ensure proof of delivery; this incurs a cost. Keep copies of the letter and mailing receipts.

Pursuing Legal Action

When a formal demand fails to yield payment, pursuing legal action, particularly through small claims court, is often the next step. This court system resolves disputes involving smaller monetary amounts, typically up to $10,000 or $15,000, depending on jurisdiction. The process involves determining the correct court to file in, typically where the debtor resides or the debt originated.

The plaintiff must obtain and complete court forms, such as a complaint or summons. These forms are filed with the court clerk, incurring a filing fee. Proper service of legal documents to the debtor is a procedural requirement, ensuring official notice of the lawsuit. Service can be performed by a professional process server, the county sheriff, or certified mail, incurring costs.

Prepare for court by organizing evidence, such as the original loan agreement, communication records, and the formal demand letter. Many small claims courts offer or require mediation before trial, where a neutral third party helps both sides reach a settlement. If mediation is unsuccessful, the case proceeds to a hearing where both parties present evidence to a judge.

Collecting on a Judgment

Obtaining a favorable judgment does not automatically mean the debt is paid; collection is a separate process. The court does not typically enforce the judgment on behalf of the creditor. Common collection methods include wage garnishment, where a portion of the debtor’s earnings is withheld by their employer and directed to the creditor. Federal law limits wage garnishment to 25% of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage, whichever is less.

Another method is a bank levy, which freezes and seizes funds directly from the debtor’s bank accounts. This typically requires a court order, often a writ of execution, served to the bank. Property liens can also be placed on real estate or other significant assets, creating a claim that must be satisfied before the property can be sold or refinanced.

Identifying debtor assets is a key part of collection, and can involve a “debtor’s examination,” a formal court proceeding where the debtor is questioned under oath about their financial situation, including bank accounts, employment, and property. Judgments remain enforceable for 7 to 10 years, but can be renewed before expiration to extend the collection period. Renewal involves filing an application with the court and serving notice to the debtor.