How long do I have to wait to take a borrower to small claims court for nonpayment?

Suing in small claims court

Recently on our legal forum a user asked, “I loaned $5,000 to a friend and they have not repaid me. How long do I have to wait to take them to small claims court for nonpayment?”

Small claims court allows individuals to resolve civil cases quickly, informally, and inexpensively. For example, in the state of Texas, individuals can file a suit in small claims court if the case involves payment of $10,000 or less. Procedures and courts vary by state and county so it’s important to review the laws for your state for more information.

How long do I have to wait to sue?

Assuming you have a written contract which clearly states the terms of the loan, the first step if the contract is breached is to review the contract. If the contract has been breached (i.e., they said they would pay you $100 each month by the 3rd and their payment is 30 days late) there is not a waiting period for filing a small claim.

The first step before filing your claim in court, however, could be to send a certified letter to the person who you are suing and demand the money you are claiming.

Next, you need to review your contract to determine whether there are any other alternative dispute resolution steps within the contract which must be attempted prior to filing a lawsuit. For example, some contracts have limiting language altering your right to sue, and some contracts have pre-requisites to your right to sue (i.e., mediation).

What if I decide to file a small claim suit?

If you have attempted to get non-payment through a friendly conversation and a demand letter, and you have met all other contractual requirements prior to filing suit, it may be time to file a small claims lawsuit.

All states will have their own processes for filing suit, but generally, this includes filing a form at the appropriate court which contains your name and address, information about the defendants, the amount of the claim, and the basis for the claim. You must also swear the statements on your form are true and pay your filing fee.

Statute of Limitations for Breach of Contract

Although the user asked how long they should wait to file a claim, a greater concern may be waiting too long. All states have statutes of limitations for filing breach of contract claims. For example, the statute of limitations for a breach of contract in Texas is four years (See Sec. 2-275 of the Business & Commerce Code). Claimants, who wait too long to file their claim, may lose their right to compensation. Generally, the statute of limitations will start from the date that the payment became overdue.


Available judgment rendered by the state

After the court hears evidence presented by both parties in the suit they will render a decision. If they find for you, the plaintiff, they will issue a judgment. State laws may limit what types of judgments can be issued. For example, the state of Texas exempts homesteads from seizure and only allows wage garnishments for unpaid taxes, court-ordered alimony or child support, and defaulted student loans.

Judgments rendered by the court for breach of contract may include:

  1. A lien on the defendant’s nonexempt real estate.
  2. Wage garnishments from the defendant’s bank accounts or wages.
  3. Seizeure of the defendant’s nonexempt property.
  4. A Turnover Order requiring the defendant to turn over nonexempt property.

Bottom line:

If you have loaned money to a friend and have a contract that outlines the terms of how a loan should be paid back and they fail in their repayment obligations, you may have the legal right to pursue them in small claims court.

There are several steps you should take prior to filing suit, including reviewing the contract and sending a demand letter for payment.

It is important, however, not to wait too long to file a suit. If you wait too long and the statute of limitations has expired, you generally will not be able to recover payment.

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