Thanks, Phil :)
Laws do vary from state to state, but it is customary to allow 30 days to pay the bill, then 1.5 to 2% per month after that. The interest rate can be higher, but 20% per day is called loan sharking and is punishable by law. Even the ez cash places don't charge that much, and they push the limit.
Make sure your friend stops recommending this guy too. Be careful what you say publicly though. You can be sued for slander. You can state facts as long as you can back them up, but you can't call him a crook or other names, thats opinion that you can't back up. If you stick to specifics, you are usually OK, its using general terms that get you into trouble.
There is no way that this fellow is going to proceed with a lawsuit. It would cost him more than he could possibly recoup. Without a contract, it is a "he says/she says" type case. Even if it made it to court, I doubt any judge would find a several month remodel on a single bath as due performance.
The guy could inexpensively file a Mechanics Lien on his own, but he would then have to get to court within 2 years. This would only hinder your ability to sell the house for the lien period. If not enforced, the lien would automatically expire.
He could also, depending on your state law and dollar limits, go to Small Claims Court, but without any written contract, I doubt he could get a judgement. I doubt that with lack of any papers at all, that he could even get a court date.
Actually I think he is just trying scare tack-tics. Many times told me that he went thru a messy divorce and complained how the lawyers took everything. I'm not really worried. Besides I have taken pictures of the unfinished work and damages he made. The tile people we hired didn't care for him and they can also tell how he messed up their job. My husband and I believe he must of had problems in other past jobs. On our bill he wanted to have us pay him because he talked with the tile people. We NEVER hired him to talk with them he just happened to be there when they came and he started a conversation with them! Actually they wanted him to leave, he was telling them what to do! The didn't like him. He kind of acted like with them like it was HIS job and like they were intruding. We hired them first before we ever heard of him. And we told him that we didn't need him to do the tile, and he seemed to resent that! On our bill he stated he had worked 43 hours. I would say that it was half that. But even if it was..... that is what he says is the amount of time he has put into our bathroom since early...... August! In the beginning he told us the his work in the bathroom would be 1 week.....
My husband did pay his bill today. He says he wants to be done with him. He wrote "Paid In Full" and sent it registered. He will have to sign at the post office to get it. We are sure he will cash it and when he does that will be the end of it as far as we are concerned! We will get this bathroom done.
I want to thank everyone for your advice You have been great! I love "This Old House" for the help they provide all of us! :)
I would also like to note that even though we did pay this contractor.....we did not pay the 20% he demanded we pay. We paid him 3 days after we let him go and after we took the time to look over the bill. It does feel like a load has been lifted off of our shoulders to know we are done with him.