Q: How long does a person have to collect money owed by a merchant
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A:
In California, the time limit to collect money owed by a merchant depends on the type of agreement in place. If the debt is based on a written contract, you generally have four years from the date of breach to file a lawsuit. If the agreement was made verbally, the time frame is two years from when the merchant failed to pay. These time limits, known as statutes of limitations, are strict—once they expire, legal action may no longer be an option.
If a merchant owes you money, try resolving the matter directly first. Sending a formal demand letter outlining the amount owed, the original agreement, and a deadline for payment can sometimes prompt action. Keep copies of all communications and proof of the debt, such as invoices, receipts, or contracts. If the merchant refuses to pay or ignores you, small claims court might be a good option for debts up to $12,500.
Waiting too long to act can make it harder to recover your money. Even if the statute of limitations hasn’t expired, evidence can become harder to obtain, and the merchant may move or close their business. If the deadline is approaching, filing a claim as soon as possible gives you the best chance of collecting what you're owed.
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