Leaders of HOAs, churches, sports clubs, volunteer organizations, and co-ops in the US face a common problem: ex-members who leave owing dues, fees, or contributions. Here's a clear 5-step path to assess the debt, send reminders, pursue resolution, escalate legally if needed, or write it off--balancing recovery chances, costs, and group relationships.
Start here: Begin with a formal demand letter outlining the amount owed and payment terms. If there's no response, try mediation for low-conflict resolution, then small claims court for debts under state limits (often $5,000–$25,000). For tiny or old debts, consider writing them off after checking statutes of limitations. This advice may not apply to disputed nonprofit pledges--consult IRS rules on enforceable contributions (IRS Publication 526).
Assess the Debt: Is It Collectible and Worth Pursuing?
Before chasing a debt from a former member, evaluate its size, age, type, and your group's resources. Small amounts under $100 often cost more to pursue than they're worth, especially if the ex-member is unresponsive or bankrupt. Time-barred debts (past the statute of limitations) can't be sued on, though you can still ask for payment.
Statutes of limitations for group debts vary by state and debt type, typically 3–6 years for written contracts like membership agreements (incharge.org, 2025 via IRS debt guidance (IRS Pub 526)). Check your state's rules first--debts become "time-barred" after this period, limiting lawsuits. For HOAs, unpaid fees can lead to liens or even foreclosure, as in a 2019 Maryland case where a homeowner lost a $200,000 home over $2,400 in dues (Steiner Law Group, 2024).
When NOT to pursue: Skip debts under $50, those over 5 years old without recent acknowledgment, or from debtors with no assets (e.g., bankrupt or relocated abroad). Signs of uncollectibility include bounced checks or evasion (Mize CPAs, 2024). Weigh costs: collection efforts might drain volunteer time in churches or sports clubs.
HOAs have stronger tools like liens under state acts (historical data, Nowack Howard, 2022--market conditions may have changed). Wage garnishments last up to 3 years but are limited (same source).
Step 1 - Send a Formal Demand Letter for Owed Group Fees
Your first move: a polite but firm demand letter. This low-cost step (free if you draft it yourself) often prompts payment without escalation and creates a paper trail for court.
Include these elements in your letter (x-cd.com, 2025):
- Debtor's name and contact info: Confirm details.
- Total owed: Principal plus late fees or interest (e.g., $50 flat fee plus 1.5% monthly, historical example Clark Simson Miller, 2018).
- Breakdown: Dues periods, dates due, prior notices.
- Payment instructions: Due date (e.g., 21 days), link to online portal.
- Consequences: Next steps like liens or suit if unpaid.
- Your contact: For questions.
Checklist:
- Send certified mail for proof.
- Copy your records.
- Avoid FDCPA violations like harassment (KSN Law, 2025).
Sample opener: "This letter is formal notice of $X owed for membership dues from [dates]. Payment is due by [date] via [link]."
This works well for clubs or volunteer groups where relationships matter.
Step 2 - Explore Mediation or Informal Resolution for Group Disputes
If the demand letter fails, mediation offers a low-conflict alternative, especially for volunteer organizations, churches, or sports clubs with community ties. A neutral mediator helps both sides reach agreement without court.
Community mediation resolves 78% of cases (Conclude ADR blog, 2025). It's cheaper and faster than court, preserving harmony.
Adherence reaches 80% after sessions (same source).
Pros: Costs $0–$500; days or weeks timeline; voluntary. Cons: Debtor must agree; ineffective if unresponsive.
When NOT to use: For hostile ex-members or HOAs needing liens. Contact local community mediation centers--ideal for volunteer groups (Tobijohnson, 2021, historical).
Start with a call: "We're open to mediation to resolve this amicably."
Legal Recourse Options: Small Claims, Liens, and Court for Club/HOA Debts
For larger debts, escalate to small claims (limits $5,000–$25,000 by state incharge.org, 2025) or HOA-specific tools like liens. You don't need a lawyer for small claims.
HOA options (Georgia Condo/POAA Acts example, historical data Nowack Howard, 2022):
- Record lien on property.
- Sue for judgment.
- Garnish bank accounts (5-day freeze), wages (up to 3 years, limited), or rent.
- Foreclose in extreme cases.
Filing checklist:
- Verify not time-barred (incharge.org, 2025).
- Gather documents: agreements, notices.
- File in local court (fees around $50–$200).
- Serve debtor.
Avoid FDCPA missteps (KSN Law, 2025). Sports clubs: treat as contract debt.
HOAs succeed via liens; clubs use small claims--check SOL first.
When Bankruptcy or Write-Off Makes Sense for Ex-Member Debts
If the debtor files bankruptcy, debts may be discharged (Chapter 7) or repaid through a plan (Chapter 13/11, 3–5 years Clark Simson Miller, 2018; Steiner Law Group, 2024). File a claim promptly.
Write off when: Uncollectible (e.g., no assets, time-barred). Businesses and nonprofits deduct bad debts if using accrual accounting, with evidence like failed collections (Mize CPAs, 2024; CCFG Credit, 2024).
For charities, pledges aren't always enforceable--disclose quid pro quo over $75 (IRS, unknown). Partial write-offs are possible over time.
Mini case: Business claims partial bad debt Year 1, rest Year 2 when fully uncollectible (Mize CPAs, 2024).
Write off uncollectibles with proof for tax benefits.
Evidence Pack - Debt Recovery Decision Matrix
| Option | Cost | Time | Success Odds | Best For | Risks | State SOL Flag |
|---|---|---|---|---|---|---|
| Demand Letter | Free–$20 | Days | High (prompts many) | All groups | None if compliant | N/A |
| Mediation | $0–$500 | Weeks | 78% resolution (2025) | Churches/volunteer | No agreement possible | Check first |
| Small Claims/Lien | $50–$500 | Months | Varies (HOA strong) | HOAs/sports clubs | FDCPA violation, costs if lose | Critical |
| Write-Off | Free | Immediate | N/A (forgo recovery) | Nonprofits/tiny debts | Tax rules apply | Time-barred OK |
Sources: Mediation Conclude ADR, 2025; others per sections (historical where noted).
Special Considerations for Nonprofits, Churches, and Volunteer Groups
Nonprofits face IRS limits: charitable pledges may not be debts without contracts; disclose quid pro quo over $75 or face $10 penalties per incident (IRS, unknown). Benevolence to employees is taxable (CapinCrouse, 2025).
Churches and sports clubs: enforce via bylaws, but consult an attorney for volunteer liability (Tobijohnson, 2021, historical). Pledges versus dues differ--unenforceable if voluntary.
Flag: No specific church or club cases; attorney advised.
Consult an attorney for nonprofit pledges versus dues.
FAQ
What's the statute of limitations for collecting group debts in the US?
Varies by state (e.g., 3–10 years for contracts); debts become time-barred, blocking suits but not requests (incharge.org, 2025). Check your state--recent payment resets it.
Can an HOA foreclose on a home for unpaid fees?
Yes, after lien under state laws (e.g., Georgia Acts, historical Nowack Howard, 2022). Example: Maryland $2,400 led to $200k home loss (Steiner, 2024).
How do I write off bad debt as a nonprofit or community org?
Prove it's uncollectible (e.g., failed demands) and deduct if you're on accrual basis (Mize CPAs, 2024). Charities: IRS rules limit pledge deductions.
Does bankruptcy erase debts owed to a sports club or church?
Often yes in Chapter 7; Chapters 13/11 allow repayment plans (Clark Simson Miller, 2018). File a claim in bankruptcy court.
Is mediation effective for money disputes in volunteer groups?
Yes, 78% resolution rate. Best for preserving ties. Adherence reaches 80% after sessions (Conclude ADR, 2025).
Apply this to your situation:
- Debt over $500 and under SOL? Send a demand letter.
- Group ties matter? Try mediation.
- Tiny or old? Write it off.
Next steps: 1. Check your state's SOL at incharge.org. 2. Draft and send a demand letter today using the checklist.