How Long Can You Chase A Debt (And Should You)?

The question of how long you can chase an outstanding debt is one we get asked about a lot. After all, once enough time has passed your accountant will advise you write the outstanding invoice off as a bad debt, mainly so that it’s not carried into new tax years. But when it comes to the legal side of things, is there a maximum amount of time you can chase an outstanding debt before it becomes problematic? What about if you’re worried you left it too long to chase, and you’ll have to give up on getting money you’re owed? We answer all of these questions, and give some tips for chasing longer overdue debts, here.

How Long Can You Leave It?

If we’re going by the letter of the law, then the time frame is 6 years. 6 years to chase an open invoice and obtain payment. But of course, it’s not as simple as just counting 6 years from the day the invoice was raised, and after that date you can’t reclaim the money. If more than 6 years have passed since the debt began, without any correspondent or acknowledgement from the debtor at all, then you can’t legally enforce that debt. You just have to write it off and move on. If, however, there has been any correspondence where the debtor acknowledges the debt in that 6 year period, then the 6 year time frame resets from that point. Any debt less than 6 years can still be acknowledged, and followed up on. But the reality is, your accountant will tell you

Why Do Debts Go Unpaid For So Long?

Honestly, for a lot of the same reasons payments are made late. Businesses have to juggle a lot of things, and the most common cause of late payments at any stage in the chain is cashflow issues. For many you would hope they can be resolved quickly and payment is just made a little late, but for some businesses cash flow issues are a more systemic problem, which means invoices go unpaid for longer.

There are also the other excuses given for late payments, such as invoices going to the wrong people, of more commonly – disputes. If a customer is disputing the invoice, maybe because they don’t agree with the amount, the service wasn’t up to standard or they are simply using it as an excuse not to pay, then this can lead to long term debts. Disputes are a difficult one to manage, and for longer term debts they usually require negotiation and mediation. But it is still possible to reclaim payment on a long term debt due to dispute, so don’t give up hope yet.

Your Long Debt Checklist

• How long has the debt been due? If it’s less than 6 years, you can still try to reclaim the money.
• Has the debtor acknowledged the debt? If they have, the 6-year time frame resets from the point they do. If now, and you’re still within the 6 years, you can still try to reclaim the money.

• Have you assessed the debtor’s situation? A lot can change for a business over time, and long-term debts could have gone forgotten. Your client may have been suffering cash flow issues of unpaid debts of their own, which are now resolved. If you know more about the clients situation, it will help you determine whether you should continue to pursue the debt, or write it off.

• Talk to an expert. If all else fails and you aren’t sure where to turn, you can always talk to an expert debt collection company. They can assess the situation and advise you on what the best course of action is, and even take over recovering the debt for you.

At Debtcol, we specialise in helping business owners recover debts, from short-term late payments to long-term defaults. We are experienced debt collectors, and have worked closely with thousands of business owners to help them recover money owed to them without damaging any of their relationships with customers. If you would like to know more, then just get in touch with the team today for a free consultation.