When the Customer Won't Pay: What a Contractor Can Do, Step by Step and State by State

Quick answer: A contractor who is not paid in the United States has four tools, in this order: a written demand letter with a deadline (there is no statutory form; California's small-claims form only asks whether you demanded payment), statutory interest on the debt where the contract is silent (10 percent a year in California, 6 percent in Texas from the 30th day, the CFO's quarterly rate in Florida, 8.06 percent in the third quarter of 2026), small-claims court (up to $12,500 for individuals and $6,250 for an LLC or corporation in California, $20,000 in Texas, $8,000 in Florida, $10,000 in Nevada, Illinois, North Carolina and New York City, $15,000 in Georgia, $5,000 in Arizona, New Jersey and Virginia), and a mechanics lien on the property, which has short deadlines that run from completion, not from the invoice due date: 90 days in California and Florida, the 15th day of the third month after completion in Texas, 120 days in Arizona and North Carolina, 90 in Nevada and Georgia, four months in Illinois and on a single-family house in New York. Before any of that, check your license: in California, Florida, Arizona, Nevada and Georgia a contractor who lacked the license the job required cannot sue to collect, and in California the customer can sue to get back what they already paid. On an owner-occupied house, several states also bar or condition the lien if the owner has paid the prime contractor or never received a statutory notice in the contract.

First, the question that decides everything: were you licensed?

In five of the largest licensing states, a contractor who did work that required a license without holding it cannot sue to collect. Not in small claims, not in any court, and in most of them cannot lien either.

If the job was under your state's licensing threshold (see the companion guide on handyman license limits by state), the bar does not apply. If it was over and you were unlicensed, the honest answer is that the law will not help you collect, and in California it exposes you to refunding what you were paid. Negotiate.

Errata: what the ranking pages get wrong

The collection ladder, by amount

Read this section as a decision tree. The dollar figures are the small-claims ceilings in section 6 and the lien deadlines in section 7.

1. Written reminder the day the invoice is due. Text or email with the invoice number, amount and a date. This is not the demand letter; it is notice that the letter is coming.
2. Demand letter at 7 to 14 days. Section 4. In California this letter is also the "notice demanding payment" that starts the 30-day clock of Civil Code §8800 and, if the owner withholds an undisputed amount, the 2 percent per month penalty.
3. If the debt fits in small claims, file there. No lawyer, low filing fee, hearing in weeks or months. Section 6.
4. If there is property, the lien is still available to you (section 8), and you are inside the deadline, record the lien. The lien does not collect by itself; it forces the issue before the owner can sell or refinance cleanly, and gives you the right to foreclose. Section 7. The deadlines run from completion, not from the due date, so decide this in parallel with step 2, not after step 3.
5. If the debt exceeds small claims and the lien did not resolve it, a lawyer. In California, Texas and Florida the prompt-payment statutes award attorney fees or high interest to the winner (section 5), which makes counsel viable on mid-sized debts.

The economics of a small lien. Recording fees are typically $20 to $100, a lien service charges $200 to $400 to prepare and serve, and foreclosing a lien is a lawsuit in the regular civil court, not small claims. On a $1,500 invoice the lien is leverage, not recovery: it works if the owner is about to sell or refinance, and otherwise it sits until it expires (90 days to one year, section 7) unless you sue. For debts under the small-claims ceiling, the small-claims judgment is usually the cheaper and faster instrument, and in most states a recorded judgment becomes a lien of its own.

The demand letter: what it is and is not

It has no statutory form. No statute in California, Texas or Florida prescribes the contents of a demand letter between a contractor and a homeowner. What matters is that it exists, is dated, states how much and by when, and that you can prove you sent it.

It does serve as evidence. California's small-claims form (SC-100) requires the plaintiff to state that they, "where possible, [have] demanded payment" (CCP §116.320(b)(3)). Florida's prompt-payment act runs only once the contractor "has furnished the obligor with a written request for payment" (§715.12(4)(a)). Texas's 35-day clock under chapter 28 runs from when the owner "receives the request" in writing (§28.002(a)). The demand letter is that document.

You are not a "debt collector." The federal Fair Debt Collection Practices Act regulates third parties collecting consumer debts. Its definition of "debt collector" excludes a creditor collecting its own debt in its own name (15 U.S.C. §1692a(6)). State consumer-protection statutes still apply to how you collect, which is why the "what not to include" list below matters.

What it should contain.

• Your legal business name, address, phone and license number.
• The customer's name and the property address.
• Invoice number, date of the work, due date, amount owed.
• The interest you will apply and from when (section 5). If the contract set no rate, use your state's legal rate.
• A concrete deadline (10 days is reasonable) and what follows: small claims and, where available, a lien.
• How to pay: link, check, transfer.
• Language: if the contract was in Spanish, the letter in Spanish with an English copy. The English copy is the one a small-claims judge will read.

What it should not contain. Threats of harm, of reporting the customer to immigration, of removing installed materials, or of "filing a lien" in a state where you are unlicensed and therefore have no lien right. A false or threatening demand letter turns you into the defendant under your state's consumer-protection act.

Template:

Demand for Payment. Date: ____. Re: Invoice #____ for work completed on ____ at ____ (property address). Amount due: $____. This invoice was due on ____. Despite our reminder of ____, it remains unpaid. Please pay in full by ____ (10 days from this letter). Beginning ____, the unpaid balance accrues interest at ____ % per year [the rate stated in our contract / the legal rate under (Cal. Civ. Code §3289 / Tex. Fin. Code §302.002 / Fla. Stat. §687.01)]. If payment is not received by that date, we will file a claim in small claims court [and record a mechanics lien against the property as permitted by (Cal. Civ. Code §8412 / Tex. Prop. Code §53.052 / Fla. Stat. §713.08)]. Pay online at ____ or by check to ____. — (Company, license #, phone)

Interest and prompt payment: what the law lets you charge

5a. California, Texas and Florida

How to use this. If your contract already says "1.5% per month," in Texas that is 18 percent a year and exceeds the 10 percent the law allows unless "otherwise provided by law"; chapter 28 is that "otherwise," but only for the payments that chapter covers. In California the 2 percent per month of §8800 is a statutory penalty, not an interest rate you invent, and it comes with attorney fees. In Florida the §715.12 formula (the CFO rate plus 12 points) currently yields about 20 percent a year on overdue payments under written contracts with lien rights. Put your state's rate in the contract, and cite the section in the demand letter.

5b. Legal rate when the contract is silent, 14 more states

The 1.5 percent per month problem. Three of the pages ranking for "late fee on unpaid invoice" present 1.5 percent a month (18 percent a year) as the standard. Minnesota caps a written rate at 8 percent a year; Michigan at 7 percent; Wisconsin and Pennsylvania default to 5 and 6 percent absent a written rate; Texas treats anything over 10 percent without a written agreement as usury. A late-fee clause is enforceable only where the rate is lawful in the state where the house sits.

Small-claims ceilings by state

Small claims is the court built for this: no lawyer, simple forms, a low fee, a short hearing. The ceiling is the most you can claim there; if you are owed more, you can sue for the ceiling and waive the rest, or file in the regular civil court.

A note for California. The $6,250 ceiling for businesses surprises people: if your company is an LLC or corporation, the company is the plaintiff and the ceiling is $6,250, not $12,500. A contractor operating as a sole proprietor with a DBA uses the $12,500 ceiling.

The mechanics lien: deadlines that do not forgive

A mechanics lien is a claim against the property, recorded with the county. It does not pay you; it gives you leverage. An owner with a recorded lien cannot sell or refinance cleanly until it is resolved, and you can sue to foreclose it. But every state conditions it on short deadlines and formal requirements, and missing one is losing the lien.

7a. California, Texas and Florida in detail

7b. Lien filing deadline, direct contractor, 21 more states

Three mistakes that void the lien. Recording late (the clock runs from completion, not from the due date). Not serving the owner as the statute requires (California and Florida). And in Texas, working on a homestead without the contract signed by both spouses and recorded before starting.

The owner-occupied carve-outs the lien services don't lead with

Lien-filing services sell the lien as a right that follows the work. On an owner-occupied house in the fourteen states we added, the lien is conditioned in one of three ways, and the first one costs direct contractors their lien more often than any missed deadline.

8a. Six states make your own lien contingent on a notice you give before the work

8b. Seven states let an owner who paid the prime in full defeat subcontractor liens

Pennsylvania (49 P.S. §1301(b), one- or two-unit residence used as the owner's home), Ohio (R.C. 1311.011(B)(1), payment before receiving the lien affidavit), Michigan (MCL 570.1118a, owner's affidavit of payment), Washington (RCW 60.04.031(3)(b), subs limited to "amounts not yet paid to the prime contractor"), Colorado (C.R.S. 38-22-102(3.5), an "affirmative defense" on an owner-occupied single-family home), Maryland (RP §9-104(f)(3), a dwelling "being erected," so not a remodel) and Utah (38-11-107, 38-11-204(4), licensed original contractor paid in full). In every one of them the defense protects the owner against subcontractors and suppliers, not against you: if the owner has not paid you, your lien survives. The practical point runs the other way. If you are the sub on a residential job and the owner paid the general, in these states you have no lien on the house; your claim is against the general.

8c. Two states give the residential lien to the prime only

Tennessee: "On contracts to improve residential real property, a lien or right of lien on the property shall exist only in favor of a prime contractor" (T.C.A. 66-11-146(a)(2), one to four units, owner's principal residence). Missouri: "No person, other than an original contractor, who performs any work … shall have a lien … unless an owner … pursuant to a written contract has agreed to be liable" (RSMo 429.013.2, owner-occupied, four units or fewer, repair or remodel). If you contract directly with the homeowner in these states, your lien is intact; your subs' is not.

8d. Licensing and registration bars in the fourteen states

Statutes of limitation: how long you have to sue on the debt

The limitation period is for suing on the debt. The lien deadline (section 7) is separate, much shorter, and does not extend because the debt is still alive.

What not to do

• Do not take anything back. Installed materials are part of the house. Removing them is property damage and, in some states, a crime.
• Do not threaten a lien you do not have. Unlicensed in California, Florida, Arizona, Nevada or Georgia, you have none. A lien recorded without a right to it exposes you to damages, and several states penalize a knowingly false lien.
• Do not charge interest the law does not allow. Texas, 10 percent a year without an agreement; Florida, 18 percent. A usurious rate in the demand letter is a free argument for the customer.
• Do not threaten immigration, police or reputation. It is the shortest path to being the defendant under your state's consumer-protection act.
• Do not wait for the invoice to "age." The lien clock runs from completion. Decide the lien the same week you send the letter.

Method and limits

We read each statute on the legislature's site, the court's official page or, where those sites block automated access, a code mirror, on the dates shown. California, Texas and Florida are covered in depth; for the other states we verified the small-claims ceiling, the direct contractor's lien filing deadline, the residential carve-out where one exists, the limitation period and the legal interest rate, not the full procedure. The lien deadlines in section 7 are the direct contractor's (the one who contracted with the owner); subcontractors and suppliers have preliminary notices and deadlines this guide does not cover. Court fees and judgment-enforcement procedures vary by county and are described in general. Florida's rate changes quarterly; we cite the third quarter of 2026 and the page where the current rate is published.

Last verified: 2026-10-28. Not legal advice.