Small claims collection ROI

Inputs

Amount owed	$4,500
Likelihood of winning	70%
Collectibility %	35%
Filing + service	$100
Your hours of time	12
Your hourly opportunity cost	$75

Supporting metrics

Expected gross recovery	$1,103
Total cost (fees + time)	$1,000
Min collection rate to break even	31.7%

About this calculator

Suing for $5k often nets less than you'd think

A small-claims judgment is a piece of paper. Collecting on it is a separate fight — and the win-rate is brutal. National average: 35% of money judgments are ever fully collected. The small-claims pursuit ROI depends on three multiplied probabilities that compound to <40% expected gross even on slam-dunk cases.

The expected-value formula

expected gross = amount × P(win) × P(collect)
expected net = expected gross − filing fees − (your hours × opportunity cost)

When small claims pays off

Documented debt against a person with W-2 wages (garnishment is reliable)
Defendant owns real estate (judgment lien attaches automatically)
Business defendant with active accounts (bank levy works)
Defendant has reputation to protect (LinkedIn, public business)

When small claims is a trap

Cash-economy defendant (subcontractor with no bank account)
Defendant has moved out of state (foreign judgment process is brutal)
Disputed facts with no documentation
Amount under $1,500 — the time + filing eats the recovery

FAQ

How do I check if someone is collectible?

Free signals: LinkedIn employment, business filings (state Sec of State), property records (county assessor — often free online). Paid signals: $25-50 background check at TLO/IRBSearch via an attorney friend. If they have W-2 income or owned real estate in the last 5 years, you're probably collectible.

What if they don't show up to court?

You win by default — but only if you serve them properly. Default judgment is the easy part; collecting is still the hard part. Default judgments are also more easily set aside if the defendant later claims improper service, so document everything (sheriff service, certified mail return).

Can I just send a demand letter?

Yes, and you should always start there. A demand letter referencing 'small claims action' on attorney letterhead resolves 30-50% of legitimate disputes without filing. Cost: $150-300 for an attorney letter; or $0 if you write your own. Always demand-letter before filing.