Published Friday, February 10, 2023 by Atlas Collections

Does the age of an account affect its collectability? Absolutely! But how the debt is affected by time varies in different circumstances surrounding that balance. The general rule of thumb is that most of the time older accounts are less likely to be recovered than younger accounts. However in my opinion, some accounts need to be harvested, much like a tree. When they are mature and ready, the green will appear. In forecasting and managing receivables early in the life of a debt a bigger picture develops. Sometimes we find that a number of intertwined conditions over time can harvest an account – bringing your money back to you.

First, let’s look at a few basics:

The statute of limitations for written or verbal contracts is six years. However, if a judgment is obtained, the bill can remain collectable for up to ten years from the date of the judgment. Some clients see this as an opportunity to extend the term of an unpaid debt approaching the end of its six-year life, and they obtain a judgment for ten more years. This means an unpaid bill could be viable for collection up to sixteen years. While this is not always desirable, some clients operate on this theory for larger balances. It can be effective – if you can afford it.

Commercial clients can also benefit from harvesting accounts in project-based situations. We know that commercial projects can experience delays and previously projected payment dates are pushed out further than originally anticipated. With solid communication along the way, coordination of collection efforts to coincide with modified payment times can be very wise indeed.

Student loans operate in a similar way, with an upfront agreement that payment is deferred until after graduation.

Another scenario is found in university towns such as our hometown, Muncie, Indiana. A large segment of local rental property owners target the student market. In such communities, a vast amount of unpaid rent arrears is due by young adults who are on their way to becoming the payers of tomorrow. Property owners renting in this market often have lease terms that are very different from standard housing lease arrangements. In these cases, most tenants enter the agreement as unemployed, non-garnishable adults who may move around for a while before paying past due rent and damages. However, these same consumers will have the ability to pay in a few years. Biding time may be the way to go with such a scenario – with a little time, the student will graduate and land that fulltime job, enabling them to at last, pay up. Sometimes patience is a very cost-effective way to manage accounts in this sector.

Of course there are always variables. One thing that may change this climate is when an employed parent or guardian signs as guarantor on the lease. This changes the entire landscape for collecting on this account.

Yes, the age of an account does affect its collectability – one way or another. As we see here, there are some ways that age can actually increase the likelihood of recovery, however isolated they may seem. In any case, beginning the process of managing those receivables by doing some regular review and planning early in the life of the debt is definitely planting for success.