Acknowledgment of debt

What it means

An acknowledgment of debt is the debtor’s written statement that the debt exists, how much it is and what it arises from. A fresh limitation period runs from it.

It shifts the position in a dispute: without it the creditor proves the claim arose, while after acknowledgment the debt is presumed to have existed and the burden moves to the debtor.

An acknowledgment on its own neither increases the debt nor defers its due date; it only confirms that the receivable exists. In commercial dealings it works even for a debt that is already time-barred: a debtor who acknowledges it can then, as a rule, no longer rely on limitation.

How it works in practice

In practice it pairs with an instalment plan: the debtor acknowledges and agrees payments, the creditor gains both a better position and a real chance of being paid. Cheaper than court for both sides.

The stronger form is a notarial deed with consent to enforceability. On default the creditor goes straight to a bailiff and skips litigation.

During the year-end stocktaking of receivables we send debtors a request to confirm the balance. A signed confirmation with the exact amount and the reason can also serve as an acknowledgment, so it is worth wording it to meet the requirements of one and filing the original with the documents.

What to watch out for

The acknowledgment must be definite: the exact amount, the reason, the date and an authorised signature. A vague "we will settle it" in an e-mail may not count, however much it sounds like one.

The new period after an acknowledgment also runs out one day. A creditor who tolerates late instalments for years after the acknowledgment may end up back where they started. At the first serious lapse it pays to apply for a payment order while the acknowledgment is fresh and the debtor still has the means to pay.