As a small business owner in Indiana, the decision of when to send an account to collections involves a similar strategic thought process as anywhere else, but with some key Indiana-specific legal nuances.

Here’s a breakdown:

1. Exhaust Internal Collection Efforts (Indiana & Everywhere Else):

This remains paramount. Before involving a third party, ensure you’ve done everything you can internally:

  • Prompt and Clear Invoicing: Send accurate invoices immediately upon completion of work or delivery of goods.
  • Polite Reminders: Begin with friendly email or phone reminders as the due date approaches or is slightly missed (e.g., 5-7 days after the due date).
  • Escalate Communication: As the debt ages (e.g., 30-60 days past due), send more formal notices. These should clearly state the outstanding amount, any late fees (if stipulated in your contract or terms), and potential consequences of non-payment.
  • Direct Contact and Negotiation: Reach out personally. Sometimes, a customer is facing temporary hardship and will work with you on a payment plan if given the opportunity. Document all conversations.
  • Offer Settlements: A partial payment is often better than no payment, especially for smaller debts.

2. When to Consider Collections (Indiana Specifics & General Guidelines):

  • 90+ Days Past Due: This is still a common benchmark. The longer a debt remains unpaid, the less likely you are to collect it. Many collection agencies won’t even take accounts under 90 days past due.
  • Unresponsiveness: If the customer completely stops communicating, avoids your calls, or breaks multiple payment promises.
  • Substantial Debt Amount: Consider the cost of collections. Collection agencies in Indiana typically operate on a contingency basis, taking a percentage (often 35-50%) of the amount they recover. For very small debts, the recovery might not outweigh the fees.
  • Indiana Statute of Limitations: This is a crucial factor. In Indiana, the statute of limitations for various types of debt typically ranges:
    • Written Contracts (including promissory notes, medical debt): Generally, six years. Some written contracts for the payment of money can extend to 10 years. Oral Contracts/Open Accounts (like credit card debt): Generally, six years.Contracts for the Sale of Goods (under the UCC): Four years.
    Important Note: The “clock” for the statute of limitations generally starts from the date of default or the last payment made. If a debtor makes a partial payment or acknowledges the debt in writing, the clock can restart. Once the statute of limitations has passed, you cannot legally sue to collect the debt, although the debt still exists. Collection agencies are generally prohibited from threatening legal action on “time-barred” debts.

3. Indiana-Specific Legal Considerations:

  • Fair Debt Collection Practices Act (FDCPA): This is a federal law that applies nationwide, including Indiana. It governs how third-party debt collectors (collection agencies) can interact with consumers. It prohibits harassment, false statements, and unfair practices.
  • Indiana Debt Collection Laws: Indiana has its state laws that regulate collection agencies and practices, often mirroring or supplementing the FDCPA. All debt collection agencies operating in Indiana must be licensed by the Indiana Secretary of State, Securities Division.
  • Small Claims Court Limit in Indiana: For smaller debts, you might consider filing a case in Indiana’s small claims court. As of recent information, the maximum amount you can sue for in Indiana small claims court is $10,000. This can be a more cost-effective option than a collection agency for some debts, as you don’t necessarily need a lawyer, though you’ll have filing fees and your time investment.

4. Documentation is Key:

Regardless of whether you go to collections or small claims court, maintain meticulous records. This includes:

  • Original invoices and contracts
  • Proof of delivery of goods or services
  • Detailed payment history
  • All correspondence (emails, letters) with the customer
  • Notes from phone calls (dates, times, what was discussed, any promises made)

In Conclusion, for Indiana Businesses:

Sending an account to collections should be a calculated decision after you’ve exhausted your internal efforts. Given Indiana’s six-year (or sometimes four-year) statute of limitations for most common debts, waiting too long can mean losing your legal recourse.

Most small businesses find that considering a reputable collection agency for debts that are 90 to 120 days past due and show no signs of resolution through your direct efforts is a reasonable tipping point. Always ensure the collection agency you choose is licensed in Indiana and operates ethically and legally. New World Collections is a reputable licensed, and bonded debt collection agency.

At New World Collections, we are experts in all aspects of bad debt recovery. We have the answers! Contact Us

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