Collections

Business debt collection in Indiana is governed by a combination of state statutes, federal regulations, and court procedures that determine how, when, and from whom you can collect money owed to your business. Indiana Code § 34-11-2 establishes the statute of limitations for most contract-based debts at six years for written contracts and two years for open accounts. The Indiana Fair Debt Collection Practices provisions and the federal Fair Debt Collection Practices Act (FDCPA) impose additional requirements on third-party collectors. For business owners pursuing their own receivables, understanding the legal framework prevents costly procedural errors and protects your right to collect.

When to Pursue Collections

The decision to pursue collections involves a cost-benefit analysis. Small debts under $1,000 may not justify legal fees unless you can use small claims court (where filing fees are modest and attorneys are optional). Larger debts — particularly those secured by contracts with clear terms — justify more aggressive pursuit. The critical factor is timing: the longer a debt goes unpaid, the less likely you are to collect. Invoices beyond 90 days overdue require immediate attention.

The Collections Process in Indiana

Demand Letters

Before filing suit, send a formal written demand letter. The letter should state the amount owed, the basis for the debt (contract, invoice, agreement), the deadline for payment, and the consequences of non-payment (including legal action and potential liability for attorney’s fees if your contract provides for them). A well-drafted demand letter resolves a significant percentage of collection matters without litigation.

Small Claims Court

For debts up to $10,000, Indiana small claims courts offer a faster, less expensive path to judgment. Filing fees are modest, procedures are simplified, and you can represent your business without an attorney (though having one improves your chances). Marion County operates nine township small claims courts; surrounding counties have their own small claims divisions.

Civil Litigation

For debts exceeding $10,000 or involving complex contractual disputes, civil litigation in Indiana’s circuit or superior courts is the appropriate venue. The process involves filing a complaint, serving the debtor, discovery, and potentially trial. Most collection cases settle before trial once the debtor recognizes the strength of the creditor’s position.

Post-Judgment Collection

Obtaining a judgment is only half the battle. Collecting on the judgment requires enforcement mechanisms: wage garnishment (limited to 25% of disposable earnings under Indiana law), bank account levies, property liens, and proceedings supplemental (where the court orders the debtor to appear and disclose assets). Judgment liens in Indiana last for 10 years and can be renewed.

Preventing Collection Problems

The best collection strategy is prevention. Clear written contracts with defined payment terms, late payment penalties, and attorney’s fee provisions give you leverage before a dispute arises. Credit checks on new customers, progress billing for large projects, and prompt invoicing reduce the likelihood of non-payment. A contract that specifies the prevailing party recovers attorney’s fees transforms the economics of collection — the debtor pays your legal costs if you win.

Frequently Asked Questions

What is the statute of limitations on debt collection in Indiana?

For written contracts, six years from the date of breach (IC § 34-11-2-11). For open accounts and oral agreements, the period is shorter. Once the statute of limitations expires, you lose the legal right to sue for collection, though the debt itself doesn’t disappear.

Can I charge interest on unpaid invoices?

If your contract specifies an interest rate for late payments, Indiana courts will generally enforce it as long as it’s not unconscionable. Without a contractual provision, Indiana allows prejudgment interest at 8% per year on money owed under a written contract (IC § 24-4.6-1-102).

What can I collect beyond the original debt?

Depending on your contract terms and the court’s judgment, you may be able to collect the original debt, accrued interest, late fees, attorney’s fees (if your contract provides for them), and court costs. Without a contractual provision for attorney’s fees, Indiana follows the “American Rule” — each party pays their own attorney’s fees.