Is it harder to recover old debts?

There are plenty of valid reasons why you might not choose to chase a debt immediately – if it seems unlikely that the debtor will pay, and you are facing cash flow problems as a result, it is entirely understandable to focus your energies on simple survival in the short term. But that should notRead More

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There are plenty of valid reasons why you might not choose to chase a debt immediately – if it seems unlikely that the debtor will pay, and you are facing cash flow problems as a result, it is entirely understandable to focus your energies on simple survival in the short term.


But that should not mean you let the debtor off the hook forever, and if you have ageing debts outstanding, it might not be too late to chase for payment; and depending on your agreed payment terms at the time, it might be particularly lucrative to do so.

First of all, the simple answer is that it is not impossible to recover aged debts, but it might be more difficult, for example due to:

  • Legislative changes since the original invoice was issued;
  • Changes to the customer’s circumstances, address, trading status and so on;
  • The Limitations Act and its six-year time limit on pursuing debts.

Let’s take each of those in turn: first of all, how do legislative changes affect existing debts? Generally speaking, if new legislation is introduced, it will not apply retrospectively to existing debts.

Therefore, instruments like the EU Late Payment Directive may have introduced new rights to recover costs from the debtor, but if the debt has been owing since before March 16th 2013, these may not apply; however, this does not mean you cannot or should not still chase for payment.

Secondly, can you still easily contact the debtor? Have they changed address, dissolved their company, or simply ‘done a runner’? If communication has broken down, a debt recovery agency may be able to provide a Tracing service to find out where your debtor is now, and in some circumstances they may be personally liable for debts even if their company has been liquidated.

And finally, if you have taken no action for six years or more, unsecured debts are typically quashed under the Limitations Act, making it essential to commence proceedings on any amounts owing that are close to this deadline.

So generally speaking, the sooner you begin debt recovery proceedings, the better the chance that the customer is still trading, still contactable, and the debt is still legally outstanding and owed to you.

Just one caveat to this with older debts – if your original payment terms asserted your right to charge statutory interest on the amount owed, the debt could actually be substantially larger than it was originally, making it especially lucrative to recover even a portion of the full amount.

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