Demand Letter vs. Small Claims Court

The Difference Between Demand Letters and Small Claims

Demand Letter: A Request
A demand letter is a formal request asking someone to pay you or resolve a dispute. It's not a legal proceeding—it's an attempt to resolve the matter without court involvement.

Small Claims Court: A Legal Action
Small claims court is actual litigation. You file a lawsuit, pay a filing fee, serve the defendant, appear before a judge, and receive a legally binding judgment.

Most experts recommend trying a demand letter first, then proceeding to small claims court if necessary. Here's why.

Advantages of Demand Letters

Lower Cost
A demand letter costs you only postage and time. Small claims court involves filing fees ($30-$150+ depending on your state and amount claimed).

Faster Resolution
A demand letter can resolve your dispute in weeks. Small claims court typically takes 2-3 months from filing to judgment, and collection can take even longer.

Preserves Relationships
A letter is less adversarial than a lawsuit. If you need to maintain a relationship (landlord, employer, business partner), a letter gives them a chance to make things right without the drama of court.

Private
Demand letters are private. Court cases are public records.

No Legal Expertise Needed
Anyone can write a demand letter. Small claims court, while designed to be accessible, still involves legal procedures.

Required by Some Courts
Some jurisdictions require you to show you attempted resolution before suing. A demand letter satisfies this requirement.

Advantages of Small Claims Court

Enforceable Judgment
A court judgment is legally binding. A demand letter creates no legal obligation—they can ignore it.

Collection Tools
After winning in court, you can garnish wages, levy bank accounts, and place liens on property. A demand letter has no such power.

Forces a Response
Someone can ignore a letter. They cannot ignore a court summons without consequences (default judgment against them).

Public Record
Sometimes the threat of a public court record motivates settlement.

Neutral Decision Maker
If there's a genuine dispute about the facts, a judge can hear both sides and make a decision. A demand letter only works if they agree to comply.

When to Start with a Demand Letter

A demand letter makes sense when:

• The amount is relatively small
• You believe the other party might pay if formally asked
• You want to avoid the time and cost of court
• You need to document your attempt to resolve the dispute
• The relationship matters and you want to give them a chance
• You're not certain about your legal position and want to test their response

When to Go Straight to Court

Skip the demand letter and file in small claims when:

• You've already communicated extensively and they've refused to pay
• The statute of limitations is about to expire
• They're about to move, hide assets, or become judgment-proof
• You've sent demand letters before without response
• It's clear they have no intention of paying voluntarily

Comparison Chart