Last resorts

When all else fails, it may be time to consider collecting your debt through a lawsuit. If the amount is under a certain limit—about $1500 in most states—you can file suit in a small claims court without the assistance of a lawyer.

If the debt is uncollectable and you don’t want to pursue it further, it’s usually possible to take a tax write off for the loss you incurred. Eligibility for this write off depends on your accounting method: if you use accrual basis, you can write off bad debt. Businesses that use cash basis cannot.

Ideally, you will never get to the point where you need to take either of these actions. But it’s impossible to forestall every instance of uncollectable debt. If you find yourself in need of help, you may wish to check with your lawyer.