Which term describes the action of taking someone to court over unpaid debts?

The term that best describes taking someone to court over unpaid debts is "litigation." Litigation refers to the process of taking legal action in a court of law. In the context of unpaid debts, when a creditor initiates litigation, they are actively seeking a legal remedy to resolve the outstanding balance, which can include obtaining a judgment against the debtor to facilitate collection.

While "debt recovery" and "collection proceedings" are related concepts that deal with efforts to collect outstanding debts, these processes may not necessarily involve the court system. They can include negotiations, payment plans, or measures taken outside of a legal framework before resorting to litigation. On the other hand, "financial dispute" is a broader term that can encompass any disagreement related to monetary matters, not just those pertaining to unpaid debts in a legal context.

Thus, "litigation" specifically identifies the formal judicial process associated with resolving debt-related issues in court, making it the most accurate choice.