When a client refuses to pay for work you’ve completed, the consequences can be stressful and costly. Whether you’re a contractor, small business owner, service provider, or attorney, unpaid invoices impact your cash flow and disrupt operations. Fortunately, Texas law provides several tools to help you recover the money you’re owed.
This guide breaks down what steps to take, what rights you have under Texas law, and when it’s time to involve a business litigation attorney.
Step 1: Understand Why the Client Isn’t Paying
Before taking legal action, it’s important to understand what caused the non-payment. Common reasons include:
- Financial hardship
- Miscommunication or oversight
- Disputes about the work performed
- Attempted delay tactics
- Complete refusal to honor the contract
Understanding the “why” helps determine whether the solution is through simple communication, or through more serious legal steps.
Step 2: Review Your Contract
Your contract is your strongest protection in a payment dispute. Make sure it clearly outlines:
- Payment terms
- Deadlines
- Late fees or interest
- Consequences for non-payment
- Scope of work
Confirm that you’ve fulfilled your obligations. If your contract is solid and well-documented, your legal position is significantly stronger.
Step 3: Communicate Professionally
Before taking the step to escalate, reach out to the client:
- Send a polite reminder
- Clarify any misunderstandings
- Offer to answer questions about the invoice
Make sure to document everything. Written communication helps build a clear record if you need to pursue legal action.
Step 4: Offer a Payment Plan (If Appropriate)
If the client is experiencing financial challenges, consider offering:
- A short-term payment plan
- Partial payments
- A modified deadline
Get any new terms in writing and signed by both parties. Payment flexibility can help you recover the debt without litigation.
Step 5: Send a Formal Demand Letter
If communication hasn’t solved the issue, your next step is a formal demand letter. This letter should:
- State the amount owed
- Reference the contract
- Provide a deadline for payment
- Outline potential legal action
Demand letters from law firms are often taken more seriously and can encourage faster payment.
Step 6: Hire a Collection Agency (If Needed)
If the debt is smaller, or litigation isn’t worth it, a collection agency may be an option. They will attempt to collect payment for you in exchange for a fee or percentage of the recovered amount. Consumer debt collection is regulated under Texas law and federal law (including rules that apply to third-party collectors), so use reputable agencies and avoid aggressive scripts.
Your Legal Options in Texas When a Client Still Won’t Pay
If all informal attempts fail, Texas law provides several legal remedies depending on your industry and the size of the debt.
1. File a Mechanic’s Lien (Contractors & Trade Professionals)
If you’re a contractor or subcontractor, you may be able to file a mechanic’s lien against the client’s property. This secures your right to payment by placing a legal claim on the property.
Important:
- Texas mechanic’s lien deadlines are strict
- Missing a deadline can invalidate your lien
- Professional legal guidance is highly recommended
- Mechanic’s liens are powerful, but Texas requirements are strict. Texas mechanic’s liens are governed primarily by Texas Property Code Chapter 53, and the required notices and deadlines vary by role and project type. The notices, deadlines, and filing rules change based on your role (original contractor vs. subcontractor or supplier) and the type of project. Missing a required step can wipe out lien rights.
- Special warning for residential homestead projects: Texas homesteads get extra constitutional and statutory predictions. In many cases, lien rights depend on front-end compliance before work begins, including a written contract executed before labor or materials are furnished, signed by the owner (and both spouses if the owner is married), and filed with the country clerk.
- Some residential construction contracts also require advance disclosures. For example, the original contractor must deliver the statutory disclosure statement before the residential construction contract is executed.
Bottom line: treat homestead and residential projects as “paper first, work second.” If the upfront requirements are missed, you can end up with an invoice but no enforceable lien.
2. Sue for Breach of Contract
You can sue the non-paying client for breach of contract in:
Justice Court (Small Claims case)
Small claims courts in Texas handle smaller disputes, generally up to $20,000 (this cap excludes statutory interest and court costs but includes attorney’s fees if they’re legally recoverable). You aren’t required to have a lawyer in Justice Court, though getting legal help can still improve your chances of success. Businesses can often appear through an owner, officer, partner, or employee rather than an attorney in Justice Court, but that flexibility usually doesn’t apply in County or District Court, where different rules exist.
Court
For larger disputes or cases needing more formal procedures (for example, complex contract disputes, multiple parties, or injunctive relief). Business entities (corporations, limited liability companies, etc.) must be represented by an attorney in these courts.
If the client ignores the lawsuit entirely, the court may issue a default judgment, allowing you to enforce payment by:
- Post-judgement bank-account garnishment (for example, a writ of garnishment aimed at funds held by a bank)
- Writ of execution against non-exempt property
- Turnover orders in appropriate cases
Collection may also require post-judgement discovery to locate non-exempt assets.
Important Texas Note: Texas generally does not allow garnishment of current wages for ordinary consumer debts, with narrow exceptions such as court-ordered child support and spousal maintenance.
3. Attorneys’ Fee Collection and Liens (For Legal Professionals)
Texas law and ethics rules make attorney-fee collection its own category:
- Texas commonly recognizes a retaining lien in certain situations (a lawyer may be able to hold client papers or property in the lawyer’s possession to secure unpaid fees), but there are important limits, especially where withholding would materially prejudice the client.
- Texas does not have a general “charging lien” statute that automatically attaches to settlement proceeds in every case and attempting to secure payment interests in a client’s litigation recovery can raise ethics issues.
Because the rules are fact-specific, attorneys should approach fee disputes carefully, document notice carefully, document notice and withdrawal steps, and stay inside the Texas Disciplinary Rules.
4. Promissory Notes & Stipulated Judgments
If the client agrees to pay over time, you have two options:
- Promissory Note: A written agreement to pay installments before litigation
- Stipulated Judgment: A court-approved agreement during a lawsuit
If the client breaks either agreement, enforcement is usually more straightforward than starting from scratch.
Important Considerations in Texas
4-Year Statute of Limitations
Texas generally allows four years to file a lawsuit to recover debt and many contract claims, measured from when the claim accrues (which can be disputed)
Legal Fees
You may be responsible for your own legal costs, unless your contract provides for attorneys’ fees or a Texas statute allows recovery (often with specific prerequisites, such as presentment in certain contract claims).
Ethical Requirements for Attorneys
Lawyers must follow state ethics rules when attempting to collect unpaid legal fees, including giving clients proper notice before withdrawing from representation.
How to Prevent Non-Payment Problems in the Future
You can reduce the risk of unpaid invoices by:
- Using clear, written contracts
- Requiring deposits or retainers
- Sending invoices promptly
- Implementing late fees
- Vetting clients before accepting work
- Keeping thorough documentation
These proactive measures help protect your business and reduce the likelihood of disputes.
When to Contact a Business Litigation Attorney
If a client refuses to pay and your attempts to resolve the issue aren’t working, legal guidance can make all the difference. An attorney can:
- Draft an effective demand letter
- Evaluate whether you can file a lien
- File a lawsuit on your behalf
- Negotiate payment agreements
- Help you recover what you’re owed
Need Help Recovering Payment? Clausewitz Reyes Is Here to Help.
If you’re dealing with a non-paying client, you don’t have to navigate the process alone. At Clausewitz Reyes, our business litigation attorneys help Texas professionals and businesses enforce their contracts and recover unpaid debts efficiently and strategically.
We can guide you through:
- Demand letters
- Contract review
- Mechanic’s liens
- Breach of contract lawsuits
- Collections litigation
- Negotiations and settlement agreements
Protect your business, contact us today to discuss your options.
