Use this debt collection guide to build a clear demand letter for Little Rock.
Debt Collection Rights in Little Rock: A Complete Guide
When someone owes you money in Little Rock, whether it is a personal loan to a friend or family member, an unpaid invoice from a client, rent owed by a former tenant, or any other debt, collecting can be frustrating. Debtors often avoid calls, make promises they do not keep, and generally drag out the process hoping you will give up. This comprehensive guide is designed to help Little Rock residents and small business owners understand their rights as creditors and take effective action to collect money owed to them.
Arkansas law provides mechanisms for creditors to pursue and collect debts. From demand letters to small claims court to judgment enforcement, there are legal tools available to recover what you are owed. Understanding these options empowers you to take appropriate action rather than simply writing off debts or engaging in collection efforts that may not be legally effective.
Many creditors hesitate to pursue debts, believing the amounts are too small to warrant action or that the legal process is too complicated. The reality is that Pulaski County District Court provides an accessible small claims forum for debts up to $5,000, and the process of creating a demand letter is straightforward. For many debts, a formal demand letter citing the debtor's legal obligations and your intent to pursue legal action is enough to prompt payment.
This guide covers the legal framework for debt collection in Arkansas, provides step-by-step instructions for creating effective demand letters, explains the evidence you need to prove the debt exists, and outlines your options for court action and judgment enforcement. Whether you are owed money from a handshake loan, an unpaid contract, or services you provided, this resource will help you pursue collection effectively and legally.
Arkansas Debt Collection Laws
The legal framework for collecting debts in Arkansas depends on the nature of the debt, how it was created, and whether you are an original creditor or a debt collector. Understanding these distinctions helps you pursue collection effectively and avoid potential pitfalls.
For debts based on written contracts (such as promissory notes, written loan agreements, or service contracts), Arkansas law provides strong protections for creditors. A written agreement establishing the debt terms serves as clear evidence of the obligation. Arkansas courts will generally enforce the terms of a valid written contract, including interest rates and payment schedules specified in the agreement.
Debts based on oral agreements are also enforceable in Arkansas, though they present evidentiary challenges. Without a written contract, you must prove the existence of the debt through other evidence such as partial payments made, communications acknowledging the debt, or witness testimony. While oral contracts are legal, written documentation is always preferable.
The statute of limitations for debt collection in Arkansas depends on the type of debt. For written contracts, including promissory notes, the statute of limitations is five years under Arkansas Code Annotated Section 16-56-111. For oral contracts, the limitation period is three years under Section 16-56-105. For open accounts (such as ongoing business credit), the limitation is typically five years. Once the statute of limitations expires, you lose the legal ability to sue for the debt, though the debt still technically exists.
Interest on debts in Arkansas is governed by statute. The legal rate of interest when no rate is specified is 6% per annum under Arkansas Code Section 4-57-104. Parties can agree to higher rates in writing, but Arkansas has usury laws limiting interest to 17% per annum or 5% above the Federal Reserve discount rate for consumer loans (Arkansas Constitution Amendment 89). Business-to-business loans may have higher permissible rates.
If you are collecting a debt originally owed to you (original creditor), you are not subject to the Fair Debt Collection Practices Act (FDCPA), which is a federal law regulating third-party debt collectors. However, if you are collecting debts for others or have purchased debts, the FDCPA may apply. Additionally, Arkansas has its own debt collection regulations that apply regardless of whether you are an original creditor or third-party collector.
Arkansas Code Section 17-24-501 et seq. establishes licensing requirements for collection agencies. If you are regularly engaged in the business of collecting debts for others, you may need to be licensed. However, attorneys collecting debts and original creditors are generally exempt from licensing requirements.
For Little Rock creditors, Pulaski County District Court provides a small claims forum for debts up to $5,000. This court offers simplified procedures that allow creditors to pursue debts without attorneys. For larger debts, Pulaski County Circuit Court has jurisdiction. The small claims process is particularly useful for personal loans and smaller business debts.
Step-by-Step Guide to Debt Collection Demand Letters in Little Rock
Before taking any collection action, verify that the debt is valid and calculate the exact amount owed. Review any contracts, invoices, or other documentation. Calculate the principal amount, any interest that has accrued according to your agreement or the legal rate, late fees if contractually permitted, and any other charges. Having an accurate amount prevents disputes and strengthens your position.
Check whether the statute of limitations has expired on the debt. For written contracts in Arkansas, you have five years from the date the debt became due. For oral contracts, you have three years. If the statute of limitations has expired, you cannot successfully sue for the debt, though sending a demand letter may still prompt voluntary payment. Do not threaten legal action you cannot legally take.
Compile all evidence of the debt: written contracts or loan agreements, invoices, receipts, promissory notes, cancelled checks showing funds you provided, text messages or emails acknowledging the debt, records of partial payments, and any other documentation. Organize this evidence chronologically and make copies.
Ensure you have accurate information about the debtor: full legal name, current address, phone number, and email if known. For business debtors, identify the correct legal entity (corporation, LLC, sole proprietorship) and its registered agent. Accurate information is essential for demand letters and court filings.
Your demand letter should include: your name and contact information; the debtor's name and address; a clear statement that they owe you money; the original amount of the debt and how it arose; any interest or fees that have accrued; the total current amount owed; a deadline for payment (typically 10-14 days); and a statement of your intended legal action if payment is not made.
Attach copies (not originals) of key documents to your demand letter. This might include the contract, promissory note, invoice, or other evidence of the debt. Showing you have documentation demonstrates the strength of your position and may discourage the debtor from disputing the debt.
Include references to relevant Arkansas law. Cite the applicable statute of limitations to show you are within the legal timeframe. If you are entitled to interest, reference the contractual rate or the statutory legal rate under Arkansas Code Section 4-57-104. This demonstrates your knowledge of the legal framework.
Give the debtor a specific date by which payment must be received, typically 10 to 14 days from when they will receive the letter. Be clear about what you expect: full payment, or whether you will accept a payment plan. State the exact amount due by the exact date.
Tell the debtor how to make payment: check mailed to a specific address, electronic transfer, payment app, or other methods you accept. Making it easy to pay removes excuses and facilitates resolution. Include all necessary information (address, account numbers, etc.).
Explain what you will do if payment is not received by the deadline. This typically includes filing a lawsuit in Pulaski County District Court (for claims up to $5,000) or Circuit Court (for larger amounts). Mention that a judgment will become a matter of public record and may be collected through wage garnishment or bank levies. Be truthful; do not threaten action you do not intend to take.
Send your demand letter via certified mail with return receipt requested. This provides proof that the debtor received your demand and when. Keep the green return receipt card. You may also send a copy via email or regular mail, but certified mail is essential for documentation.
If you do not receive payment or response by your deadline, be prepared to follow through with legal action. Gather your documentation, research the court filing process, and decide whether to proceed with a lawsuit. Sometimes a follow-up contact after the deadline passes prompts payment, but do not make empty threats.
Essential Evidence for Little Rock Debt Collection Claims
Written Agreements: A written contract, promissory note, or loan agreement is the strongest evidence of a debt. The document should identify the parties, the amount borrowed or owed, any interest rate, the repayment terms, and ideally be signed by the debtor. If you have such a document, keep the original safe and use copies for collection efforts.
Invoices and Billing Records: For business debts based on services rendered or goods provided, invoices serve as evidence of the amount owed. Invoices should show the date, description of services or goods, amount due, and payment terms. A series of unpaid invoices establishes the debt history.
Payment Records: Records of partial payments acknowledge the debt and restart the statute of limitations. Bank statements, cancelled checks, or payment app records showing payments made by the debtor prove they recognized the obligation. Note dates of partial payments carefully.
Communication Records: Text messages, emails, letters, or voicemails from the debtor acknowledging the debt are valuable evidence. Statements like 'I know I owe you' or 'I will pay you when I can' establish the debt exists. Save all such communications and organize them chronologically.
Bank Records: If you loaned money, bank records showing the transfer of funds to the debtor prove you provided the money. Cancelled checks, wire transfer records, or electronic payment records document that the loan was made.
Witness Statements: If anyone witnessed the loan being made, the agreement being reached, or the debtor acknowledging the debt, their written statement and willingness to testify can support your claim. Witness testimony is particularly important for oral agreements.
Business Records: For business debts, accounts receivable records, contracts for services, delivery receipts, and other business documents establish the transaction and the amount owed. Maintain organized business records as a matter of course.
Calculation of Interest: If you are claiming interest, document how you calculated it. Show the principal amount, the interest rate (contractual or legal), the time period, and the resulting interest amount. Courts will want to see the math behind your interest claim.
Demand Letter and Proof of Delivery: Keep copies of any demand letters you send along with certified mail receipts proving delivery. This documents your collection efforts and may be relevant in court.
Prior Collection Efforts: Document all attempts to collect the debt: dates and summaries of phone calls, copies of letters sent, records of in-person conversations, and responses (or lack thereof) from the debtor. This history shows you made good faith efforts before resorting to legal action.
Critical Deadlines for Debt Collection in Arkansas
Statute of Limitations - Written Contracts: For debts based on written contracts, including promissory notes and written loan agreements, Arkansas provides a five-year statute of limitations under Arkansas Code Section 16-56-111. The clock typically starts when the debt becomes due or when the debtor defaults on payment. Once five years pass without payment or acknowledgment, you cannot successfully sue for the debt.
Statute of Limitations - Oral Contracts: For debts based on oral agreements, the statute of limitations is three years under Arkansas Code Section 16-56-105. Because oral agreements are harder to prove and have a shorter limitation period, documenting such debts in writing as soon as possible is advisable.
Statute of Limitations - Open Accounts: For open accounts (such as ongoing credit arrangements), the statute of limitations is five years, running from the date of the last item of the account or the last payment.
Tolling and Restarting the Limitations Period: Certain actions can restart or pause the statute of limitations. A partial payment by the debtor typically restarts the clock. A written acknowledgment of the debt may also restart the period. Absence from the state may pause (toll) the limitations period under some circumstances.
Demand Letter Response Period: Your demand letter should give the debtor a reasonable time to respond, typically 10 to 14 days. This is not a statutory requirement but represents standard practice. If the deadline passes without payment, proceed with your planned next steps.
Small Claims Court Timing: After filing a small claims case in Pulaski County District Court, the court will schedule a hearing typically within 30 to 60 days. You must ensure the defendant is properly served with the summons and complaint within the time allowed by court rules. Attend your hearing date without fail.
Judgment Validity Period: Once you obtain a judgment, it remains valid and enforceable for a significant period. In Arkansas, judgments are generally enforceable for 10 years and can be renewed. The judgment accrues interest at the judgment rate. Collection efforts can continue throughout this period.
Appeals Period: After a small claims judgment, the losing party typically has 30 days to file an appeal. If no appeal is filed, the judgment becomes final. If appealed, the case proceeds to the higher court for review.
Common Mistakes to Avoid in Little Rock Debt Collection
Not Documenting the Debt in Writing: The most common mistake is failing to document loans or debts in writing. When you lend money or extend credit, get a written agreement signed by the borrower specifying the amount, repayment terms, and any interest. Without written documentation, proving the debt becomes much harder.
Waiting Too Long to Pursue Collection: Delay is the enemy of debt collection. The longer you wait, the harder collection becomes: debtors move, their financial situations change, evidence becomes stale, and eventually the statute of limitations expires. Pursue collection promptly when debts become delinquent.
Not Keeping Records of Communications: When you attempt to collect a debt through phone calls or informal conversations, keep records of what was said. Note dates, times, and summaries of conversations. These records can be important evidence of the debtor's acknowledgments or promises.
Threatening Action You Will Not Take: Demand letters should state your intended legal action if payment is not made, but only threaten what you actually intend to do. Empty threats undermine your credibility. If you say you will file suit if not paid by a certain date, be prepared to follow through.
Harassing the Debtor: While you have the right to pursue collection, engaging in harassment, threats of violence, calling at unreasonable hours, or other abusive conduct can create legal liability for you and undermine your collection efforts. Keep collection communications professional and lawful.
Not Verifying the Debtor's Current Information: People move. Make sure you have the debtor's current address for demand letters and court filings. A demand letter to an old address is ineffective. Court papers must be properly served at the correct address.
Failing to Calculate Interest Correctly: If you are claiming interest, make sure you calculate it correctly according to your contract or the legal rate. Incorrect calculations can delay collection and damage your credibility. Document your calculation methodology.
Ignoring the Statute of Limitations: Know the applicable statute of limitations for your debt and act before it expires. If the limitations period has passed, you cannot successfully sue. Never threaten legal action on a time-barred debt as if it were still enforceable.
Accepting Partial Payments Without Documentation: Partial payments are good because they acknowledge the debt and restart the limitations period, but document them carefully. Get receipts to the debtor and note how the partial payment is applied to the debt balance.
Not Following Through After Demand Letters: Sending a demand letter but not following through with legal action if the debtor ignores it teaches the debtor that they can ignore your demands. If you set a deadline and it passes without payment, take the next step you promised.
Frequently Asked Questions About Debt Collection in Little Rock
Arkansas has a five-year statute of limitations for debts based on written contracts and a three-year limitation for oral contracts. The clock starts when the debt becomes due or when the debtor defaults. Once the limitations period expires, you cannot successfully sue for the debt, though the debtor may still voluntarily pay. Partial payments or written acknowledgments can restart the limitations period.
If your written agreement specifies an interest rate, that rate generally applies, subject to Arkansas usury limits. For consumer loans, interest is capped at 17% per annum or 5% above the Federal Reserve discount rate (Arkansas Constitution Amendment 89). If no rate is specified, the legal rate of interest in Arkansas is 6% per annum under Arkansas Code Section 4-57-104. Business loans between sophisticated parties may have different rules.
Yes, oral contracts are enforceable in Arkansas, but they are harder to prove. You will need evidence beyond your testimony that the debt exists, such as communications from the debtor acknowledging the debt, records of partial payments, witness testimony, or other documentation. The statute of limitations for oral contracts is only three years, so act promptly.
Pulaski County District Court handles small claims up to $5,000. If the debt owed to you is $5,000 or less, you can file in small claims court without an attorney. For larger debts, you would need to file in Pulaski County Circuit Court, which has more formal procedures.
Once you have a judgment, you can use several collection methods. Wage garnishment allows you to take a portion of the debtor's wages directly from their employer. Bank levies allow you to seize funds from the debtor's bank accounts. Property liens attach your judgment to the debtor's real estate. You can also pursue execution on personal property. The court clerk's office can provide forms and guidance for these post-judgment remedies.
If the debtor claims they paid, demand proof: cancelled checks, bank records, receipts, or other documentation of payment. Without proof, their claim is just an assertion. Compare any claimed payments to your records. If payments were made but applied to other debts or if the debtor is confused about amounts, clarify the record. Your documentation of the debt and any payments received is essential.
Whether you can recover collection costs and attorney fees depends on your contract. If your written agreement includes a provision for recovery of collection costs and attorney fees, courts will generally enforce that provision. Without such a provision, you typically cannot recover these costs. For small claims court, attorney fees are rarely an issue since most parties represent themselves.
If your debtor files for bankruptcy, an automatic stay prevents you from continuing collection efforts. You will receive notice of the bankruptcy filing. Depending on the type of bankruptcy and the nature of the debt, you may receive partial payment through the bankruptcy process, or the debt may be discharged (eliminated). Consult with a bankruptcy attorney if a significant debtor files bankruptcy.
What to Expect When Settling Debt Collection Disputes in Little Rock
Debt collection often involves negotiation, and settling for less than the full amount owed is common. Understanding realistic settlement expectations helps you make informed decisions about whether to accept offers and how to structure payment arrangements.
Many debtors cannot pay the full amount owed immediately but may be able to pay something. Payment plans are a common resolution: the debtor agrees to pay a certain amount monthly until the debt is satisfied. If you accept a payment plan, get it in writing specifying the payment amounts, due dates, and consequences of default. Consider whether accepting regular payments over time is preferable to continued collection efforts.
Some debtors offer lump-sum settlements for less than the full amount owed. They may propose paying 50% immediately to resolve the debt. Whether to accept such offers depends on several factors: the likelihood of collecting the full amount through litigation, the debtor's apparent financial situation, the age of the debt, and your time and energy for continued pursuit. A guaranteed partial payment today may be worth more than an uncertain full payment later.
When negotiating settlements, start by restating the full amount owed including interest and fees. Debtors may dispute the total, and you should be prepared to document how you calculated it. If you are willing to accept less than full payment, decide your bottom line before negotiating. Make any settlement offer contingent on prompt payment; do not give too much time for debtors to change their minds.
If you reach a settlement agreement, document it in writing. The agreement should state the original amount claimed, the settlement amount, when and how payment will be made, and that acceptance of the settlement constitutes full satisfaction of the debt. Both parties should sign. For larger amounts, consider having the agreement notarized.
If the debtor defaults on a payment plan, you have options. Your agreement should specify that default allows you to pursue the full original amount (not just the remaining payments). You can then send a new demand and proceed with legal action if necessary. Do not let defaults slide without response.
In small claims court, judges sometimes encourage settlement even after a case is filed. If the debtor appears at the hearing and proposes a reasonable payment arrangement, the judge may suggest you accept it. Courts prefer voluntary compliance to forced collection. However, you are not required to accept an inadequate offer; if the debtor refuses reasonable settlement, proceed with your case.
Once you have a judgment, settlement negotiations may continue. Debtors facing wage garnishment or bank levies often prefer to arrange direct payments. You can agree to payment plans even post-judgment, though you should not release the judgment until you are fully paid. The judgment remains your security interest until satisfied.
Little Rock Debt Collection Resources and Contacts
Handles small claims cases up to $5,000, the primary venue for collecting smaller debts. The clerk's office provides forms and basic procedural guidance.
Address: 401 West Markham Street, Little Rock, AR 72201
Phone: (501) 340-8800
Website: pulaskicounty.net
For debt collection lawsuits exceeding $5,000. More formal procedures apply.
Address: 401 West Markham Street, Little Rock, AR 72201
Phone: (501) 340-8500
Verify the legal name and registered agent of business debtors before filing suit.
Website: sos.arkansas.gov
For larger or more complex debt collection matters, find an attorney.
Phone: (501) 375-4606
Website: arkbar.com
For information about licensing requirements if you collect debts for others.
Phone: (501) 682-1190
Provides free legal information and assistance to low-income residents. May assist with understanding collection rights.
Phone: (501) 376-3423 or (800) 950-5817
Website: arkansaslegalservices.org
The Debt Collection Playbook
Proof is Power
Contracts, invoices, texts, emails… gather all evidence of the debt.
Time is Your Ally (and Their Enemy)
Interest accrues. Late fees may apply. The longer they wait, the more they may owe.
Track Every Penny
Principal, interest, late fees… don't miss a dollar.
The Debtor's Options
Many states allow you to recover collection costs, including attorney fees in some cases. Know your rights.
Arkansas Debt Collection Laws
Applicable Laws
- FDCPA
- Arkansas Deceptive Trade Practices Act
Small Claims Limit
$5,000
Consumer Protection Agency
Arkansas AG / CFPB
Collection Combat FAQ
When should I send a demand letter?
After the second broken payment promise. Don't let them string you along indefinitely.
What if they ignore my demand?
Small claims court is your next step. The filing fee is often recoverable, and you don't need a lawyer.
How do I prove they owe me money?
Contracts, invoices, text messages, emails, bank transfers, promissory notes, or witness statements all help prove the debt.
Can I charge interest?
Yes, if your contract includes interest terms. Even without a contract, many states allow pre-judgment interest on debts.
What about collection costs?
Many contracts allow recovery of collection costs and attorney fees. Check your agreement and state law.
Is there a time limit to collect?
Yes. Statutes of limitation vary by state and debt type, typically 3-6 years. File suit before the deadline expires.
What if they claim they already paid?
Demand proof. Bank records, cancelled checks, or receipts should show payment. If they can't prove it, they still owe you.
About FreeDemandLetter
FreeDemandLetter provides free, AI-powered demand letter generation with location-specific legal citations. Our content is reviewed by subject matter specialists and regularly updated to reflect current laws. We help thousands of people resolve disputes effectively—but we're not lawyers, and this isn't legal advice. For complex situations, consult a licensed attorney in your jurisdiction.