Handling old unpaid invoices involves sending a final demand letter, utilizing collection agencies, or pursuing legal action (e.g., small claims court). For immediate cash, consider invoice factoring, where a third party buys the debt at a discount. If deemed uncollectible, write them off as bad debt for tax purposes.
In general, clients cannot refuse to pay late invoices if they have received goods or services as agreed upon in the contract or agreement. Late invoicing doesn't absolve them of their payment obligation.
This rule is under the Limitation Act 1980. These limitations outline that a creditor can pursue unpaid debt from a debtor for up to 6 years from the date of the provided product or service.
Most companies don't realise that they are entitled to chase invoices that go back as far as 6 years. It is important to remember that the time limit starts from when your customer last acknowledged owing the debt or made a payment on account against the invoice, not from when the invoice became due.
Under the Limitation Act 1980, invoices can be issued up to six years after the work was completed or the goods were delivered. While there is no legal restriction within this time frame, issuing invoices promptly is always best to avoid disputes or complications.
Key Takeaways
The "777 rule" in debt collection, also known as the 7-in-7 rule, is a CFPB regulation (Regulation F) limiting calls: collectors can't call more than 7 times in 7 days for a specific debt, nor call within 7 days of a conversation about that debt. It aims to prevent harassment, applying to calls, texts, and emails, though exceptions exist, and the presumption of compliance can be rebutted by aggressive call patterns like rapid succession or highly concentrated calls.
Filing a Lawsuit for Breach of Contract
If your client agreed to pay for goods or services and failed to follow through, they may be in breach of contract. You have the right to sue for the amount owed, and possibly additional damages, depending on your contract and the impact of the missed payment.
The general rule is that if it becomes necessary to issue legal proceedings to recover an unpaid invoice, then the creditor must do so within the statutory time limit of six years from when the clock starts to tick.
Public sector organisations are legally required to pay invoices within 30 days, while consumer clients have no fixed legal period – meaning you can set a fair and reasonable term yourself.
For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts. If your home is repossessed and you still owe money on your mortgage, the time limit is 6 years for the interest on the mortgage and 12 years on the main amount.
According to California Code of Civil Procedure § 337(1), the statute of limitations for a written contract is four years. Under § 339(1), the limit for an oral contract is two years.
Getting a Client to Pay an Invoice after Nonpayment
Written Contracts: For debts involving written contracts, such as commercial agreements, promissory notes, or client service contracts, the statute of limitations extends to four years from the date of the breach.
Do invoices hold up in court? No, an invoice will not usually hold up in court. An invoice is simply a request for payment, but it's not a legal document and therefore not legally binding. You may be able to legally enforce an invoice if you also have a valid contract.
If you don't pay your debt, you'll face escalating consequences like late fees, credit score damage, and increased interest; eventually, your account may go to collections, leading to persistent contact, potential lawsuits, wage garnishment, or property liens, though you won't go to jail unless you ignore a court order for contempt.
Be persistent: Send friendly reminders
According to Small Business, it's okay to send monthly bills that clearly show overdue payments. Calling the customer once a week might also work, but do be aware of your state's collection laws and the fine line when persistent becomes too persistent.
The 11-word phrase often cited to stop debt collectors is "Please cease and desist all calls and contact with me, immediately," which leverages your rights under the Fair Debt Collection Practices Act (FDCPA) to halt most communication, though it must be sent in writing via certified mail to be legally binding, and collectors can still notify you of lawsuits.
When talking to a debt collector, you should not give out sensitive financial info (bank, SSN), make promises you can't keep, lie, or provide information that reveals your ability to pay; instead, ask for debt validation, know your rights (like the statute of limitations), and keep the conversation brief, focusing on confirming details rather than offering up personal financial details that can be used against you.
It might surprise many companies that unpaid invoices, under a simple contract, can be legitimately chased for up to 6 years. Legal proceedings would need to be issued within 6 years of the date of the invoice to prevent any claim from being statute barred.
Contact Your Creditor to File a Dispute
If you believe there's an error on your credit report, the federal Fair Credit Reporting Act (FCRA) gives you the right to file a dispute for free. Submit a dispute. You may want to submit a dispute directly to the creditor that reported the late payment.