When a customer won't pay an invoice, send a written demand letter with a deadline first. If that fails, you have five options: a payment plan, small claims court, a mechanics lien if you did construction work, a collection agency or attorney, or writing the debt off. For most small invoices, small claims is the cheapest route that ends in a court judgment, and a lien is the strongest tool for trades, but only if you meet strict state deadlines.
Last checked: October 2026, against the court and state pages linked in each section. This is general information, not legal advice. Rules vary by state and country, and they change, so check with your local court or a lawyer before you act.
This guide starts where our overdue invoice escalation ladder ends: the reminders, the phone call and the final notice have not worked, and the invoice is around 60 days overdue.
What should you check before you escalate?
Before you spend money chasing an invoice, confirm three things.
- The client received the invoice. Check the email address, look for a bounce, and ask whether it reached the person who approves payments.
- The invoice is correct. The amount, the work described and the dates should match what the client agreed to, ideally in a signed quote or contract.
- There is no open dispute. If the client says the work is unfinished or wrong, that is a dispute about the work. A judge or agency will ask about it, so answer it in writing first.
Gather your paper trail now: the quote or contract, the invoice, every reminder, notes from phone calls and any written promise to pay. Every option below works better with it.
What are your options when a customer won't pay?
| Option | Upfront cost | How long it takes | Best for |
|---|---|---|---|
| Demand letter | Postage | 10 to 14 days for a reply | Every unpaid invoice, as the first formal step |
| Payment plan | Your time | As long as the plan runs | Clients who want to pay but can't pay in full |
| Small claims court | A filing fee, such as $30 to $75 in California | Weeks to months, plus collecting the judgment | Clear debts under your state's limit |
| Mechanics lien | Recording and notice costs, then a lawsuit if unpaid | Tied to strict state deadlines | Contractors and trades who improved the property |
| Collection agency | Set by the agency, usually a share of what it recovers | Varies | Debts you don't want to chase yourself |
| Attorney | Fees or a share of the recovery | Months | Large invoices or debts above the small claims limit |
| Write it off | The full balance | Immediate | Small balances, or clients who have closed down |
You can combine them. A demand letter often leads to a payment plan, and a lien claimant can still negotiate before the foreclosure deadline.
How do you write a demand letter for an unpaid invoice?
A demand letter is a formal written request for payment that states what you will do if the client doesn't pay by a set date. In California, you must ask for payment before you file in small claims if you can: the court's small claims guide (SC-100-INFO) says "A person who sues in small claims court must first make a demand, if possible."
Send it by email and by post, and keep a copy. Include the invoice number, the amount, the original due date, the reminders already sent, a payment deadline and the next step you will take.
Re: Invoice 1042, $2,500, due May 15
Invoice 1042 for $2,500 remains unpaid 60 days after its due date. I sent reminders on May 16, May 22 and June 14, and we spoke by phone on May 29. Please pay the full balance by July 28 using the pay link below or by bank transfer. If I have not received payment or heard from you about a payment plan by that date, I will file a claim in small claims court for the full amount plus court costs.
Only name a step you will take. A threat you don't follow through on teaches the client to ignore your deadlines.
How does small claims court work for an unpaid invoice?
Small claims court is a simplified court for low-value debts. You file a short form, pay a fee, have the papers served on the client and present your paper trail to a judge. Each state sets its own dollar limit, fees and rules, and some limits depend on whether you sue as a person or as a company.
| State | Limit | Filing fee | Worth knowing |
|---|---|---|---|
| California | $12,500 for individuals, including sole proprietors; $6,250 for businesses | $30 up to $1,500, $50 up to $5,000, $75 up to $12,500 | Demand payment first; lawyers can't represent you at the hearing; no more than two claims over $2,500 a year |
| Texas | Justice courts hear cases up to $20,000 | Set by county | Harris County charges $54 in court costs, plus $85 for a constable to serve the papers |
| New York | $10,000 in New York City, $5,000 in other city courts, $3,000 in town and village courts | $15 up to $1,000, $20 above that ($10 and $15 in town and village courts) | Corporations and partnerships can't use small claims; they file a commercial claim instead |
Sources: California Courts SC-100-INFO, small claims or limited civil and filing fees; Texas Government Code section 27.031 and the Harris County Justice Courts fee schedule (effective January 1, 2025); New York CCA 1801, UCCA 1801, UJCA 1801, CCA 1803 and CCA 1809.
In New York, a company with its principal office in the state uses the commercial claims part instead. The limit is the same as small claims in that court, the filing fee is $25 plus mailing costs, and you can file no more than five commercial claims a month (CCA 1801-A and CCA 1803-A).
For any other state, search for your state court's small claims page and check the limit, the fee and who can file. Use the court's own site, not a summary.
Does winning in small claims mean you get paid?
Not automatically. A judgment says the client owes you the money. If they still don't pay, you go back to the court's process for collecting a judgment, which takes more forms and sometimes more fees. Before you file, ask whether the client has money or assets to collect from. A judgment against a business that has closed is hard to turn into cash.
Should a contractor file a mechanics lien?
A mechanics lien is a legal claim against the property you improved, which can stop the owner from selling or refinancing until you are paid. It is often the strongest option for contractors, electricians, plumbers and other trades. The catch is that every step has a deadline set by state law, and missing one can end your lien rights.
California (from the Contractors State License Board):
- Subcontractors and material suppliers serve a preliminary notice within 20 days of starting work or delivering materials. Direct contractors and laborers don't need one.
- Record the lien within 90 days of completion of the work.
- If the owner records a notice of completion, the window shrinks to 60 days for a direct contractor and 30 days for a subcontractor or supplier.
- File a lawsuit to foreclose the lien within 90 days of recording it.
Sources: CSLB, if a mechanics lien is filed against you and how to prevent a mechanics lien.
Texas (Property Code chapter 53):
- An original contractor files the lien affidavit by the 15th day of the third month after the month the work was completed on a residential project, or the fourth month on any other project.
- Subcontractors and suppliers must also send a notice of claim for unpaid labor or materials to the owner and the original contractor: by the 15th day of the second month after the month the work was done (residential) or the third month (other projects).
Source: Texas Property Code sections 53.052 and 53.056.
In other states, find the lien statute or your state contractor board's guide as soon as an invoice goes past 30 days. Lien law is technical, so talk to a construction lawyer before you record one.
What do collection agencies charge?
Collection agencies set their own fees, usually as a share of what they recover. No government source publishes a standard rate, so compare quotes. Get the rate, any minimum fee and what happens if you settle directly with the client in writing before you sign.
Who your client is matters. The Fair Debt Collection Practices Act covers personal and household debts, and the FTC states that "Business debts are not covered by the FDCPA". If you invoiced a homeowner for repairs, an agency collecting that debt must follow the federal rules. If you invoiced a company, it generally doesn't apply, though state laws may.
A collection attorney works like an agency, but can also sue for you. That makes sense for invoices above your state's small claims limit, or when the client is a business with assets.
What does recovering a $2,500 invoice actually cost?
There is no reliable data on typical recovery for small invoices, so treat individual stories as stories. One 2009 thread on the Mike Holt electrical forum shows how differently it can go.
One electrician wrote that on an invoice of about $2,500 handed to a collection attorney, "Total collected in a year and a half $250. Cost $400 to file in small claims court." Another replied that a small claims case cost about $35 to file, and "we arbatrated for monthly payments and I got all my money."
These are two anecdotes, not statistics, and fees have changed since 2009. What they show is that the result depends on the client's ability to pay more than on the route you pick. Before spending money, weigh the fee and your time against the realistic chance of getting paid.
When should you write off an unpaid invoice?
Write it off when chasing it would cost more than you could realistically recover: a small balance, a client who has closed down, or a judgment you can't collect. Writing it off moves it out of accounts receivable and into bad debt. It doesn't cancel the debt, so you can still accept payment if the client pays later.
How the write-off affects your taxes depends on your accounting method. Ask your accountant.
What about clients outside the US?
Rules differ by country. In England and Wales, you make a court claim for money through GOV.UK, which used to be known as going to small claims court. If the claim is £10,000 or less and the client disputes it, you'll be told to attend mediation. The court fee depends on the amount claimed.
For a client in another country, suing is often impractical. Taking a deposit and short payment terms up front protects you more than any court process.
How do you stop the next customer from not paying?
Prevention is cheaper than any option above. Five habits do most of the work:
- Take a deposit on large jobs. Our deposit invoice guide shows how to bill a deposit and then the balance.
- Shorten your terms for new clients. Due upon receipt gets the ladder started sooner than net 30.
- Agree on a late fee before the work starts. The late fee calculator shows what a rate adds up to.
- Send reminders on a schedule, so no invoice drifts to 60 days by accident.
- Keep the paper trail from the first quote onward. It is your evidence if a case ever reaches court.
How can SolidInvoice help?
SolidInvoice keeps the paper trail and the reminders in one place. On Pro and Business plans, it emails the client 3 days before the due date and at 1, 7 and 14 days overdue, with a pay link in every message, so you reach the demand letter stage with a dated record of every reminder. If a client agrees to a payment plan, record each partial payment against the invoice, and the pay link charges only the remaining balance. See how it fits trade work on the invoicing for contractors and invoicing for electricians pages.
Customer won't pay FAQ
What can I do if a customer won't pay an invoice?
Send a written demand letter with a payment deadline first. If that fails, you can agree a payment plan, file in small claims court, file a mechanics lien if you did construction work, hire a collection agency or attorney, or write the debt off. Check your state's rules and deadlines before choosing.
Can I take a client to small claims court for an unpaid invoice?
Yes, if the amount is under your state's limit. California allows $12,500 for individuals and sole proprietors and $6,250 for businesses. Texas justice courts hear cases up to $20,000. New York City allows $10,000, but corporations and partnerships must use the commercial claims part instead.
How much does it cost to file in small claims court?
It depends on the state and the amount. California charges $30 for claims up to $1,500, $50 up to $5,000 and $75 up to $12,500. New York City charges $15 or $20. Texas fees are set by county; Harris County charges $54 in court costs plus $85 for service.
What percentage do collection agencies take?
Agencies set their own rates, usually as a share of what they recover. No government source publishes a standard rate, so get the percentage, any minimum fee and the terms for direct settlements in writing before you sign.
How long do I have to file a mechanics lien?
It depends on the state, and the deadlines are strict. In California, you record the lien within 90 days of completion, or 60 days for a direct contractor and 30 days for a subcontractor after a notice of completion. In Texas, residential original contractors file by the 15th day of the third month after the month work was completed.
Should I write off an unpaid invoice?
Write it off when recovery would cost more than you can realistically collect, such as a small balance or a client who has closed down. It moves the amount to bad debt but doesn't cancel it, so you can still accept a late payment. Ask your accountant how it affects your taxes.
Keep a dated record of every reminder, with a pay link in each one. Start a free 14-day trial of SolidInvoice.