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What to do if someone owes you money and won't pay

You've asked nicely and nothing happened. There are five steps left, from a last clear message to small claims court to letting it go, and each one costs a little more of the relationship than the one before.

Checked 2026-09-28 · All guides

If you haven't sent a friendly reminder yet, start with how to ask for your money back. This page is for when you have, and they still haven't paid. It's general information, not legal advice. You send every message yourself; no one here contacts them for you.

Step 1: send one clear, final message

Put the amount, the date it was due, one last date, and what you'll do if it passes. Only say what you'll really do. Pick a tone and copy the text, email or what to say face to face.

Who are you asking? What are you asking for? Tone

Brief Warm Formal

Your name

Their name

Amount they owe

Date it was due

Final date

What you'll do if it isn't paid

What you type stays in this browser. Nothing is sent to us or saved. You send the message yourself; we never contact anyone.

Step 2: offer a payment plan, in writing

Often the real problem is that they can't pay it all at once and are embarrassed to say so. Give them an easy yes:

"I know $900 is a lot at once. Could you do $75 each payday, starting October 17, until it's paid? If that works, just reply 'yes' so we both have it written down."

A "yes" in a text records the debt and the plan. A short IOU they sign now is even better.

Step 3: a demand letter you send yourself

A demand letter is a formal, written request for the money. In California, the court wants you to ask the other side for the money before you start a small claims case, and says to tell them how much they owe and why (California Courts Self-Help). A plain letter covers:

the amount lent, the date, and what was agreed ("to be repaid by August 1");
what's been repaid, and what's still owed;
a deadline, usually a couple of weeks away, and how to pay you;
that if it isn't paid by then, you may file in small claims court.

Keep it calm and factual: no insults, no threats of police or of telling people. Keep a copy and proof you sent it.

Step 4: small claims court

Small claims court helps people settle money disputes quickly, usually without a lawyer. Every state has one, or a lower court that plays the same role, and the most you can sue for there runs from $2,500 (Kentucky's small claims division) to $25,000 (Delaware's Justice of the Peace Court). Most states sit between $5,000 and $10,000. Minnesota, Texas, Utah and West Virginia allow $20,000; Mississippi $3,500 (each read on the state's court site or statute, 2026-09-27). One example in full: in California, an individual can sue for up to $12,500, the filing fee is $30 to $100 (fee waivers exist), and lawyers can't represent you in the hearing, though you can ask one for advice beforehand (California Courts Self-Help, checked 2026-09-27). Each state's court website lists its own limit, forms and filing fee; there's no current national directory of them, so search for your state's judicial branch and "small claims". Or find free legal help at LawHelp.org.

Two things to know before you file:

Winning isn't the same as being paid. "The court doesn't collect the money for you" (California Courts Self-Help). If they still don't pay, you use court steps such as a wage garnishment or a lien, a recorded claim on their property that can pay you when it's sold or refinanced.
There's a time limit for suing. Every state has a statute of limitations, a deadline after which you can't win a lawsuit over a debt if the other side raises it. For a written loan (a signed IOU or loan agreement) it runs from 3 to 10 years, and 6 years is the most common, in about half the states. Delaware, Maryland, South Carolina and Washington, D.C. allow 3 years; Iowa and Wyoming allow 10. For a handshake loan with nothing written it's 2 to 10 years, most often 3 or 6. California, for example, gives 4 years for a written contract and 2 for an oral one (Cal. Code Civ. Proc. §§ 337, 339). The clock usually starts when a payment is missed, not when you lent the money; with installments, each missed payment can start its own clock until you demand the whole balance. In many states a partial payment or a signed note admitting the debt restarts it. (Periods read on each state's code site, 2026-09-27.)

Step 5: decide to let it go

Each step costs more of the relationship: a payment plan rarely ends a friendship, a court case often does. If the money isn't worth that, or the stress, there are two ways to let it go:

Forgive it. Forgiving a debt counts as a gift for tax purposes. The person you forgive owes no income tax on a gift. See loan or gift?
Treat it as a bad debt. If it was a real loan and you've given up on it, you may be able to deduct it on your taxes (below).

What counts as proof if there's no contract?

You may have more proof than you think. Gather:

Texts, emails and messages where they asked to borrow, said "I'll pay you back", or mentioned the amount.
Bank transfers or payment-app records showing the money going to them, with any notes like "loan".
Any repayments they made: a part-payment shows they knew it was a loan.
Any IOU or note, even a photo of a handwritten one.
Your reminders and their replies, screenshotted with dates.

Questions people ask

What is it called when someone owes you money?

The person who owes is the debtor. You, the person owed, are the creditor.

Can I call the police?

Usually not. Not repaying a personal loan is generally a civil matter, not a crime, so the route is the steps above. Never threaten criminal charges to get paid.

What if they're avoiding me?

Send your final message and demand letter in writing to their last known address or email, and keep proof you sent them. Don't turn up at their work, message their friends, or post about them. It rarely gets you paid and can create problems of your own.

What if they filed for bankruptcy?

Stop asking for the money. Filing usually puts an "automatic stay" in place, which stops lawsuits and most collection activity against them (U.S. Courts glossary; 11 U.S.C. § 362): no calls or texts asking for payment, no lawsuit, no garnishment. Then:

Read the court's notice. It gives the case number, the court and any deadline. If you aren't listed as a creditor, the case is public on PACER, the federal courts' records site.
A Chapter 7 "no asset" notice says you don't need to file a claim now. Most individual Chapter 7 cases are like this. If money turns up later, the court sends a new notice giving at least 90 days to file.
Otherwise, file a proof of claim (Official Form 410, free on uscourts.gov) with that bankruptcy court. In a Chapter 7 case the person filed themselves, or in Chapter 13, it's on time if filed within 70 days after they filed (Fed. R. Bankr. P. 3002(c)). Attach copies of your IOU, messages and bank transfers, with account numbers cut to the last 4 digits; don't send originals. (The uscourts.gov Chapter 7 overview still shows an older 90-day rule; the current rule is 70 days.)
If you believe the money was obtained by fraud, the deadline to ask the court not to wipe out the debt is 60 days after the first date set for the creditors' meeting on the notice (Rule 4007(c)). Otherwise a personal loan is normally wiped out at the end of the case.

A legal aid office can help if your loan is secured (a lien on a car or home) or you're raising fraud. On the tax side, the borrower's bankruptcy is generally good evidence that at least part of the debt is worthless (IRS Publication 550).

The tax side of a bad debt: a worked example

General information from the IRS, not tax advice. Say you lent a friend $1,200. They repaid $300, then stopped. You've taken reasonable steps to collect, and there's now no reasonable chance they'll pay the other $900.

It must have been a real loan. You have to show you meant it as a loan when you handed over the money. If you lent it knowing they might not repay, the IRS treats it as a gift, and there's no deduction (IRS Topic 453).
It must be totally worthless. You can't deduct part of a personal loan. If they're still paying you $20 a month, it isn't worthless yet. You claim it in the year it becomes worthless. You don't have to go to court if you can show a judgment couldn't be collected.
What you could deduct: $900, the cash you lent that never came back ($1,200 minus $300). Interest you never received can't be added.
How it counts: a personal bad debt is a short-term capital loss, reported on Form 8949 with a statement describing the debt, who owes it, your relationship, how you tried to collect and why it's worthless.
What $900 might mean: capital losses first cancel out any capital gains you had that year. Beyond that, up to $3,000 a year ($1,500 if married filing separately) can reduce your other income, and any extra carries to later years (IRS Topic 409). With no gains, the whole $900 would fit under that limit, lowering your taxable income by $900. What that saves you depends on your tax bracket.
Forgot to claim it? You can amend the return for the year it became worthless within 7 years of that return's due date, or 2 years after you paid the tax, whichever is later (IRS Publication 550).
If they pay later, what you get back counts as income in the year you get it, but only up to the amount your bad-debt deduction actually lowered your tax. In this example the whole $900 cut your taxable income, so a $500 repayment the next year is $500 of income, and repayments stop counting once they reach $900. If the deduction didn't lower your tax at all, the repayment isn't income (26 U.S.C. § 111; IRS Publication 525, "Recoveries"). It's reported as other income on Schedule 1 (line 8z on the 2025 form).

For help with your own return, free options are IRS Volunteer Income Tax Assistance and Low Income Taxpayer Clinics. More messages for every stage are in our scripts for someone who owes you.

Sources

Sources checked 2026-09-28.

General information, not legal or financial advice. You send every message yourself; we never contact anyone on your behalf.