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The Impact of A Statute of Limitations on B2B Debt Collection

Updated: Jan 26


A black and white photo of a man sitting on a couch reading a contract

Debt collection is a complex process, and EverWorth understands the intricacies involved. In this blog post, we dive into EverWorth's fee structure, which considers two primary factors: the age and amount of the debt. We also explore the impact of a statute of limitations on debt collection and the importance of written contracts in mitigating disputes. By delving into these elements, businesses can gain a better understanding of the fee structure and make informed decisions when it comes to collecting debts.


EverWorth’s fee structure for B2B debt collection takes into account two things: the amount of the debt and the age of the debt. Additionally, the statute of limitations for collecting a debt can impact how the fee structure is determined as it varies by state.


Age of the Debt

The longer the debt remains unpaid, the higher the fee. This is because older debts are generally more difficult to collect, as the chances of the debtor voluntarily paying decrease over time. 


Amount of the Debt

EverWorth also charges a percentage of the total amount collected as their fee. However, it is a tiered fee structure, where the percentage charged varies depending on the size of the debt. Lower-value debts attract lower percentage fees, while higher-value debts have higher percentage fees due to the additional effort required to collect them.


Effect of Statute of Limitations

The statute of limitations plays an important role in the fee structure for debt collection agencies. If a debt reaches the statute of limitations and becomes time-barred, it means that legal action cannot be taken to enforce payment. In such cases, we face limitations on the actions we can take to collect the debt. As a result, the fee charged for pursuing time-barred debts is higher, reflecting the increased risk and limited means available to collect these debts.


Additionally, having written contracts instead of verbal agreements is crucial for several reasons, including the potential impact on the statute of limitations for debt collection. In many states, having a written contract can extend the statute of limitations for collecting a debt, effectively doubling the time frame during which legal action can be taken.


State Jurisdictions

When drafting a contract, it's essential to consider the jurisdiction where the contract will be enforced. This is particularly crucial when it comes to debt collection as the statute of limitations varies by state. A statute of limitations is a time limit enacted by a state law, and it defines the window during which legal action can be taken to collect a debt.


As a result, it's critical to be aware of the statute of limitations in both the debtor's and the client's jurisdictions. If the client is located in a state with a more extended statute of limitations period than the debtor's state, it would be in their best interest to have the contract jurisdiction in their state. This strategy gives them more time to pursue legal action to collect the debt, should it become necessary.


On the other hand, if the debtor is located in a state with a more extended statute of limitations period, it may be advantageous to have the contract jurisdiction in that state. Doing so will make it easier to pursue legal remedies to collect the debt while maintaining the benefits of the more extended time frame provided by that state's laws.





Understanding the statute of limitations and carefully considering where to have the jurisdiction of the contract will help maximize potential legal remedies available to recover debts. It can be advantageous to consult with an experienced attorney when negotiating and drafting B2B contracts to ensure they are enforceable and to protect your business interests.


Written vs. Oral Contracts

Written contracts provide a clear and documented record of the terms and conditions agreed upon by both parties. This documentation helps prevent misunderstandings and disputes that may arise from verbal agreements, where memories and interpretations of the agreement may differ. With a written contract, both parties have a comprehensive understanding of their rights, obligations, and expectations from the outset.


From a debt collection perspective, having a written contract can be highly beneficial. When attempting to collect a debt, creditors often need to prove the existence and terms of the debt. Verbal agreements can be challenging to substantiate, making it harder to meet the burden of proof in a legal dispute. Conversely, a written contract serves as tangible evidence of the debt, making it easier for creditors to establish the validity and enforceability of the debt.


Moreover, as mentioned earlier, some states recognize the importance of written contracts and offer extended statute of limitations for debts covered by written agreements. This extended timeframe can provide creditors with a longer window to pursue legal action, increasing their chances of recovering the debt. It emphasizes the importance of formalizing agreements through written contracts to protect the interests of all parties involved.


Having written contracts instead of verbal agreements is essential for various reasons, including its impact on the statute of limitations for debt collection. Written contracts provide a clear record of the agreed-upon terms, help prevent disputes, and significantly enhance the ability to prove the existence and terms of the debt. Additionally, in states where written contracts extend the statute of limitations, it provides an extended timeframe for creditors to pursue legal action for debt collection.


Conclusion

When considering the use of a debt collection agency, businesses should be aware of the statute of limitations in their jurisdiction, as it could impact their ability to collect debts and may influence the decision to work with such an agency.


Overall, EverWorth’s fee structure is fairly based on factors like the age and amount of the debt. The statute of limitations for collecting the debt can affect the fee structure, particularly for time-barred debts, where higher fees will be charged due to the limited legal recourse available.


 

About EverWorth


EverWorth is a debt collections company on a mission to help people feel financial relief by offering dignified and diplomatic debt collection services designed to help companies preserve their reputation and relationships. EverWorth currently offers commercial debt collection and business transformation consulting services for companies in 27 states. EverWorth is focused on growing our team, our partner network, and evaluating acquisition opportunities for consumer and commercial debt agencies across the country. We are 100% female-owned and based in Brooklyn, New York.

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