A client that does not pay is not a customer or client. They offer attain the status of client or customer when the bill is paid.
What many do is to cut them off and walk away. If they threaten to sue let them since it ends quickly in court since they didn't pay so there is no contract, etc.
I own a web hosting company and i was working with a client that did not pay me for a job, blaming me for there problems with the website. I did not have full control and there was a third party hosting the site. We needed to summit many forms etc. and could not because of no full FTP rights.
Any thoughts of this, and i apologize if I'm posting in the wrong forum