Uncollectible

Describes a debt, account, or receivable that is deemed impossible or highly unlikely to be recovered by the creditor. This is typically due to the debtor's inability or unwillingness to pay, bankruptcy, or the passage of time exceeding the statute of limitations. The uncollectibility of an item often results in its being written off as a loss in accounting, impacting the creditor's financial statements and potentially reducing taxable income. Factors influencing uncollectibility include the debtor's creditworthiness, the age of the debt, and the legal avenues available for collection.

Uncollectible meaning with examples

• After months of unsuccessful attempts to contact the customer and recover the outstanding balance, the accounting department classified the invoice as uncollectible. Despite repeated phone calls and demand letters, the customer's financial situation had deteriorated to the point where payment was deemed impossible. The company decided to write off the debt and recognize the loss, thus reflecting a realistic view of their financial situation.
• Due to the debtor's declaration of bankruptcy, the loan became definitively uncollectible. The assets of the debtor were insufficient to cover the debts owed, and the creditor was unlikely to receive any repayment. The company had already provided for this with their bad debt allowance. The accountant formally removed the debt from the books, acknowledging the financial reality.
• Following the death of a debtor, the remaining balance on their credit account became uncollectible. The estate had no assets, and the company was unsuccessful in obtaining payment from the debtor's family. There was no path of legal recourse. The uncollectibility of the account prompted the cancellation of all further billing.
• After 7 years had passed since the invoice was issued, the debt became uncollectible due to the statute of limitations expiring. The company was no longer legally able to pursue collection efforts. The management was faced with the necessity to account for it as a bad debt to adhere to accounting standards.