How to determine the unrecoverability of a debt?

Once adebtcan no longer be recovered in a certain and definitive manner, it is considered to be dead or unrecoverable. Determining the unrecoverability of a debt is a necessary step for the creditor. In fact, once the recovery of the debt becomes impossible, undertaking additional recovery procedures quite simply represents a loss of time and money.

That, for instance, is why it is important to be able to determine the unrecoverable character of a debt.

Unrecoverable character of a debt

First of all, how and when can a debt be declared unrecoverable? The unrecoverable character of the debt must be proven by the creditor. The latter must have initiated recovery procedures against the debtor through the offices ofa lawyer, a process serveror arecovery company.

Only after these measures and the proven failure of recovery may the debt in question be determined as unrecoverable. We must also be careful not to confuse an unrecoverable debt with abad debt. A debt considered as unrecoverable is a debt the recovery of which proves to be impossible, finally and in fact, while a bad debt more simply represents a risk of non-recovery.

In other words, this latter therefore has a “doubtful”, not a “compromised” character, which is the case for the unrecoverable debt.

The certificate of unrecoverability

When all actions forlegalorout-of-court recoveryare exhausted, a certificate of unrecoverability is delivered to the creditor. This is an official document that certifies the unrecoverable character of a debt, the financial impossibility of the debtor’s honouring the debt. The certificate of unrecoverability may be issued at the creditor’s request according to several situations:

• The debtor is in a situation of legal liquidation;
• The debtor has left his premises without informing the creditor of his new address;
• In the event of prescription of the debt.

The certificate of unrecoverability is then delivered by a professional recognized and accredited by the State as a recovery company or as an agent appointed by the Commercial Court. Once this certificate is obtained, the creditor may write the debt up in the company accounts under Losses and will then be able to recover the amount of the VAT.

The certificate of unrecoverability therefore represents a not inconsiderable fiscal advantage for a company.

Conclusion

How to determine the unrecoverability of a debt (from A to Z).

• The creditor must undertake all possible action (judicially and/or extra-judicially);
• Confirm the failure of these recovery measures;
• Prove the unrecoverable character of the debt;
• Obtain a certificate of unrecoverability;
• Write the unrecoverable debt under Losses up in the company accounts;
• Recover the VAT.

As you will understand, determining the unrecoverable character of a debt is an important and necessary step for a creditor. Don’t hesitate to contact us either by e-mail atsales@tcm.beor by telephone on +32 16 74 52 04.