What To Do When Customers Don't Pay

Updated: Jun 17


When somebody owes you money, whether that person is a customer, client, or even a neighbor, you become a creditor. The person that owes you money is a debtor. A creditor/debtor relationship is much more significant than your buddy owing you some money because you spotted him at lunch the other day. As a creditor you are entitled to the money you lend out. As a creditor, it’s critical to understand what your rights are and how to protect them.


There are many businesses that provide services or sell products without requiring full payment up front. This may be because they are selling an expensive product, such as furniture. Doctor’s offices or dentists typically send a bill in the mail. Because they don’t require the full payment upfront, a payment plan should be set in place to ensure that payments are made.


You should try to maintain a good relationship with the debtor if possible. If there is a chance that you will see them in the future, you don’t want that relationship with them to have turned sour over money issues. This is especially important when dealing with family or close friends. However, this doesn’t mean to be a push over. Don’t let debtors take advantage of your efforts to maintain a good relationship.


Whether you are a business or an individual, there are several actions that you can take on your own. If that doesn't work, you can seek the help of third parties, such as a collections agency or a court, to get your money back:

  1. Demand Payment Yourself

  • The first thing that you can do to collect money from your debtor is to contact them directly and demand payment. This is difficult because it's easier for the debtor to say "no" or just ignore your phone calls.

  • You should try to collect on your own within 120 days. If your efforts are unsuccessful within that 120-day range, reach out to a collections agency.

2. Collections Agencies

  • Collections agencies function as a third party that collects debts owed to you in exchange for a percentage of the amount collected. Select a debt collections agency that adheres to the Fair Debt Collection Practices Act (FDCPA), which regulates debt collection practices and prohibits unethical and deceptive practices. It's smart to go to a good, trustworthy collections agency. Not all debt collectors are experts, and some are even dishonest. Look for one with a good reputation that you know will take care of you.

  • Once a collections agency gets involved, they are generally successful after just a phone call or a letter. This gives a debtor a better understanding of the seriousness of the issue.

  • Many collections agencies will collect on debts amounting to $50.00 or more. However, it's better to contact a collections agency if the debt is a significant amount of money. Debt collectors and lawsuits are very expensive. Suing somebody over $50 is probably not the best business decision.

3. Go to Court

  • If the collections agency is unsuccessful, you can sue to collect the debt. Many collections agencies will already have an attorney retained and ready to take on your case, or they can at least refer you to one whom they trust.

  • If you are able to prove your case or the debtor doesn’t contest the claim, you will be entitled to an enforceable judgment. In this judgment, a judge will grant creditors the authority to seize property of a debtor with the help of the local sheriff. You may also receive a wage or bank garnishment. This is where the judge gives you the authority to collect from the debtor's wages or bank account.

Creditors and collections agencies sometimes carry a bad reputation for being so aggressive in seizing money, but the truth is, they are only trying to protect their rights as creditors. If a debtor doesn't pay back the money they owe to a creditor, that creditor has been wronged. Creditors are only trying to protect their own finances or business. It is impossible for a business to be successful if customers don't pay their bills. You can’t pay your own bills if you don't get paid back the money that you lend out. If you are a creditor, know that you have rights. Speak with an attorney to understand what your rights are as a creditor.


Recent Posts

See All