How to Collect a Debt From a Business: 7 Steps From Demand Letter to Judgment

The invoice a customer never paid is worth whatever the creditor can prove, file, and then find, and those are three different skills. Most businesses that go looking for how to collect a debt from a business are strong at the first, uncertain at the second, and surprised by the third, because a judgment is a piece of paper that tells a sheriff what to look for without telling anyone where it is.

What follows is written for the creditor: the supplier, contractor, landlord or service firm that is owed money by another company. It uses New York's rules as the working example, and another state's rules would need checking at each step.

1. The File Comes Before the Letter

A collection case is won or lost on paper the creditor already holds. The signed contract or purchase order, the invoices, the delivery receipts or completion sign-offs, and every email in which the customer acknowledged the balance or asked for more time belong in one place before anyone writes a demand.

The emails matter more than creditors expect. New York recognizes a claim for an account stated, and the First Department restated the rule in 2024 in TH Fashion Ltd. v. Vince Holding Corp.: "a defendant's receipt and retention of invoices seeking payment for goods or services rendered, without objection within a reasonable time, gives rise to an actionable claim for account stated." The same decision shows the claim's edge. The plaintiff lost against a parent company that had only promised to "escalate" its subsidiary's invoices, because asking someone for help in getting paid is not the same as that someone agreeing to pay.

The file also fixes the deadline. Under CPLR 213 a contract claim in New York generally carries six years, but a claim for breach of a contract for the sale of goods falls under UCC 2-725, which allows four years from the breach, "regardless of the aggrieved party's lack of knowledge." A written acknowledgment signed by the debtor can take a claim out of the limitations period under General Obligations Law 17-101. An oral promise to pay next month cannot.

2. A Contractor's Lien Clock May Already Be Running

Before the demand letter, a creditor who improved real property should look at the calendar. New York's Lien Law section 10 allows a notice of mechanic's lien within eight months after the last work or materials, or within four months for a single family dwelling, filed with the county clerk where the property sits. Section 11 then requires service on the owner within five days before or thirty days after filing, and proof of that service filed within thirty-five days, or the lien terminates. The lien lasts one year unless foreclosure is begun or an extension is filed.

These periods run whether or not anyone has sent a letter. A contractor who spends five months negotiating politely can arrive at the lien question with weeks to spare, and a lien is secured by the property, which the customer's bank account is not. Construction counsel should handle the filing itself.

3. The Demand Letter States a Number the Creditor Can Defend

A demand letter is a rehearsal of the complaint. It names the debtor exactly as it appears on its formation record, states the principal, and states interest in a way a judge would accept. In New York, CPLR 5001 provides that interest "shall be recovered upon a sum awarded because of a breach of performance of a contract," computed "from the earliest ascertainable date the cause of action existed," and CPLR 5004 sets the statutory rate at nine percent a year unless another statute provides otherwise. On a hypothetical unpaid invoice of $18,500, nine percent simple interest comes to $1,665 for each year the balance sits.

A letter that adds invented fees, or threatens what the creditor has no right to do, supplies the debtor with its first defense. A letter that sets a date, attaches the invoices, and says what happens next supplies nothing but a decision.

4. The Court Is Chosen by the Amount and by Who Is Suing

New York City's small claims part is closed to most business plaintiffs. Under the Civil Court Act a corporation, partnership or association may not bring a small claim, though it can be sued in one. Businesses use the commercial claims part instead, under section 1803-A and its neighbors: the same $10,000 cap as small claims in the city, exclusive of interest and costs, a filing fee of "twenty-five dollars and the cost of mailings" (as of September 2026), a plaintiff with its principal office in New York, a defendant who resides, keeps an office, or is regularly employed in the city, and a certification that no more than five such claims have been filed that calendar month.

The hypothetical $18,500 invoice does not fit. It belongs in an ordinary civil action, where the rules of pleading and service apply in full. Courts outside the city have lower limits of their own.

5. Silence After Service Becomes a Default

Once the summons is served, the debtor has a fixed period to appear: CPLR 320(a) gives twenty days after personal service, or thirty days after service is complete for the other listed methods. A business that lets the period pass is in default.

The creditor then does not need a trial. Where the claim is "for a sum certain or for a sum which can by computation be made certain," CPLR 3215(a) allows an application to the clerk within one year after the default. An unpaid invoice with a contract rate is the textbook sum certain, which is one more reason the file in step 1 matters.

6. A Docketed Judgment Reaches Real Estate, but Not Bank Accounts

The clerk dockets a money judgment after the judgment roll is filed, and a transcript can be docketed in any other county. From docketing, under CPLR 5203, a transfer of the debtor's real property in that county is ineffective against the creditor for ten years, subject to exceptions and extensions. A New York money judgment is presumed paid after twenty years under CPLR 211(b).

The judgment attaches to nothing movable on its own.

7. Enforcement Is a Search Conducted With Subpoenas and Sheriffs

An information subpoena comes first in most files, because it is cheap and it asks the right question. Under CPLR 5224(a)(3) it may be served by registered or certified mail, and the answers must be made "in writing under oath" and returned within seven days after receipt. Banks, landlords and the debtor's larger customers are the usual recipients.

The restraining notice follows. Issued by the clerk or by the creditor's attorney as an officer of the court, a notice under CPLR 5222 forbids the debtor to transfer property and forbids a served bank to pay the debtor's funds "to any person other than the sheriff," for one year after service or until the judgment is satisfied or vacated. A bank that holds twice the amount due is free as to the rest.

Restraint holds money in place; it does not move it. Moving it takes an execution under CPLR 5230, delivered to the sheriff and returnable within sixty days (extendable in writing by up to sixty more), and a levy under CPLR 5232, after which the garnishee must turn over the property to the sheriff. A levy that produces nothing within ninety days becomes void except as to what was already transferred, which is why the information subpoena comes first (a sheriff sent to the wrong bank is, from the creditor's side, the most expensive way to learn that the debtor moved its operating account to a credit union two counties away the week the summons was served). Priority in personal property, under CPLR 5202, runs from delivery of the execution to the sheriff, not from the judgment.

In 2019 New York narrowed confessions of judgment to debtors who reside in the filing county; that change limits one shortcut, not the ordinary route described here.

Debtors with assets elsewhere add a step. A New York judgment against a Florida company, for example, is recorded in Florida under that state's enforcement statute, and no execution may issue there until 30 days after the clerk mails notice to the debtor. The judgment travels, though slowly, and rarely by surprise.

Where the Creditor Is Also a Debtor

Every step above is legal work, and a creditor pursuing a business customer needs a collection attorney licensed where the suit will be filed, not a settlement company. Delancey Street negotiates on the debtor side of such files; not a law firm, it does not collect for creditors, sue anyone, or enforce judgments.

But unpaid receivables tend to arrive in pairs with debts of one's own. A supplier waiting on $18,500 from a customer may be missing its own merchant cash advance debits for exactly that reason, and the advance does not wait for the lawsuit. For that side of the ledger, Delancey Street offers a free and confidential review of the business's own contracts, coordinating with independently licensed counsel on anything legal. The customer's invoice is still worth whatever the creditor can prove, file, and find, and the creditor's own obligations are measured on a different calendar.