What if I (the creditor) can't collect from the other party (the debtor)?

Updated: Apr 28

You may be able to take a tax deduction on an “uncollectible” court judgment. A judgment may be considered uncollectible if you have failed at reasonable attempts to collect on the debt.

Different Internal Revenue Service (IRS) reporting rules apply for business debts and personal debts. Consult the IRS or a tax professional to learn important details about writing off uncollectible judgments on your taxes.

You can also renew the judgment and continue to attempt to collect. Money judgments automatically expire (run out) after 10 years. To prevent this from happening, the creditor must file a request for renewal of the judgment with the court before the 10 years run out. If the judgment is not renewed, it will not be enforceable, and the debtor will not have to pay you any remaining amount of the debt.

Once a judgment has been renewed, it cannot be renewed again until 5 years later. But it has to be renewed at least every 10 years, or it will expire. When the judgment is renewed, the interest that has accrued will be added to the principal amount owed.

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