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Create a Demand for Money Owed Letter

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First consider sending a formal Demand for Money Owed letter. Be polite and professional. For many debtors, a formal letter will do the trick and you won't have to take more serious measures.

Occasionally, the person who owes you money is willing to pay, but due to present circumstances, is unable. The easiest way to collect in this instance is to work together to draw up a reasonable payment plan or arrange to have them pay in the future.

If the debtor outright refuses to pay and you can't work out a payment plan, you have more options.  Although procedures vary by state, you should generally obtain proof from your small claims court that you won the judgment and therefore have a right to collect. This document is typically called a writ of execution. Take this to your local sheriff. He or she will serve the document to the appropriate institution and collect from your debtor.

Once the document has been served, collection options may include:

Garnishment. You may be able to garnish up to 25% of the debtor's wages. There are, however, complicated rules depending on the circumstances, so be sure to ask your sheriff for your state's garnishment rules.

Till tap. If the debtor is a business, the sheriff may be able to take the amount of the judgment directly from the business' cash register.

Equipment and other tangible assets. You may be able to order the sale of certain equipment and tangible assets (like cars and machinery) to pay your claim. However, there are debtor protection laws that limit the efficacy of this approach.

Deposit accounts. You may be able to seize money located in the debtor's deposit accounts — savings, checking, money market, and mutual fund accounts in banks, savings and loans, or credit unions. To do so, you will need the name of the bank, the branch, the exact name on the account, and the account number.

Real estate lien. A real estate lien gives you the right to be paid a certain amount of money from the proceeds of the property. Placing a lien won't get you your money right away. It gives you standing as a creditor to be paid from proceeds if the property is sold or refinanced. To place a lien, register your judgment with the land records office in the county in which the debtor owns real estate. Be mindful of how many creditors have already filed liens, since their claims will be serviced before yours.

It is important not to push the debtor into bankruptcy. Chapter 7 bankruptcy absolves a debtor's small claims judgment, which means you will be able to collect nothing.  Remember, judgment collection laws vary, so check with your state to for more specific information, or find a lawyerfor more help.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.


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