A write-off is not a release
Writing a receivable off as bad debt is an accounting decision, and it usually does not cancel what the customer owes. The harder questions are whether the time to sue has run and whether anyone who owes the money can still pay it. Limitation periods differ by state and by type of claim, and in New York consumer credit debts face a shorter period than most business contracts. For business debts, a later written acknowledgment of the balance can sometimes bear on that timing, so old correspondence is worth reading closely. How the write-off is treated for tax purposes is a separate question for your accountant.
Reconstructing aged accounts
Old accounts are often weak because the documents scattered when the balance went unpaid. Pull the signed agreement or accepted terms, invoices, statements, proof of delivery, and payment history, and identify the person at your company who can explain them. Look for the debtor's last known addresses, principals, and any guarantors, along with any sign that the debtor dissolved, merged, or filed for bankruptcy. If a debt was discharged in bankruptcy, collecting it is generally prohibited, so checking court records comes before any contact. If you plan to sell the accounts, a buyer will expect a clean chain of documents, and gaps reduce what the portfolio is worth.
Pursue, place, sell, or close
In a first conversation we sort the portfolio by age, size, debtor type, and documentation, then match each group to a route. Larger, well-documented balances owed by debtors with assets may justify a demand and a lawsuit. Smaller accounts are often better placed with a collection agency under a written agreement, and consumer accounts bring federal, New York, and New York City collection rules into play, with the exact set depending on whether you collect them yourself or place them with an agency. Some accounts are not worth further effort, and closing them out cleanly avoids later disputes. Throughout, we keep in mind that what you or your agents say to an old debtor becomes evidence, and that pressure tactics can create claims against you.
