Mayor Chuck Reed recognizes economic times are tough, but the city is short on cash too, he said.
"The taxpayers are paying the bills and if people owe us money, it's our obligation to collect it as best we can," Reed said.
People can always pay their bills at City Hall, but starting in November, 1,000 past-due accounts will be turned over to two collection agencies each week.
The city is not talking about collecting on unpaid parking tickets, but rather a variety of debt owed to the city from damage to city property, garbage removal and unpaid business license fees.
"Other things are rental real estate where there might be some real estate that we rent and people haven't paid us," San Jose finance director Scott Johnson said.
Most of the past-due accounts are at least one year old; the mortgage crisis has made a challenging environment for debt collectors.
"Because of the uniqueness of what's gone on in our valley here, a lot of people have had to relocate and we have to go find them and talk to them about taking care of their obligations," Gary Call of Professional Recovery Systems said. His firm is one of the two collection agencies being utilized by the city.
The city will pay the debt collectors about 10-15 percent of the money they actually collect.
If necessary, the collection agencies can take legal action and garnish wages to collect on monies owed, but unemployment benefits and Social Security are exempt from collections.