Acknowledgement of debt, explained.
When a customer admits they owe you but can’t pay in one go, an acknowledgement of debt turns their promise into a signed, enforceable commitment. Here’s what it is and what to put in it.
By Kyle Zorger, founder of ARS Financial · Updated · 5 min read
In short
- An acknowledgement of debt (AOD) is a signed document in which the debtor admits owing a specific amount, and usually agrees how and when they’ll pay it.
- It interrupts prescription: the three-year clock starts again from the date it’s signed.
- It’s strong evidence if you ever need to go to court, because the debt is no longer in dispute.
- Include the amount, what it’s for, a payment plan, what happens on default, and signatures.
- For extra security from a company, ask its directors to sign a written suretyship.
What an acknowledgement of debt is
An acknowledgement of debt is a written admission by the debtor that they owe you a specific amount. Most also set out a payment plan, so the customer gets time to pay and you get a firm, signed commitment instead of another verbal promise.
Under the Prescription Act, the debtor acknowledging the debt interrupts prescription, so a fresh three-year period starts. That alone makes an AOD worth getting whenever a debt is going to take a while to pay off.
What to include
- The full names of both parties, with ID numbers for individuals or registration numbers for companies.
- The exact amount owed, and what it’s for: the invoice numbers and dates.
- The payment plan: how much, on which dates, and into which account.
- Interest, if any, and how it’s calculated.
- What happens if a payment is missed, typically that the full outstanding balance becomes due immediately.
- An address where legal documents can be delivered to the debtor (a domicilium address).
- The date, the place of signing, and signatures, ideally in front of two witnesses.
Making it stronger
- Make sure the person signing for a company is authorised to do so, for example a director.
- Ask the directors to sign a suretyship for the company’s debt. A suretyship must be in writing and signed by the surety to be valid.
- Some AODs include a consent to judgment, which lets you get a court judgment quickly if the payments stop. It has specific legal requirements, so have an attorney draft that part.
- Keep the signed original, and send the debtor a copy.
A word on the National Credit Act
If the debtor is an individual or a small business and the payment plan charges interest or fees, the arrangement may be treated as a credit agreement under the National Credit Act, which brings its own rules. If that applies to you, take advice before charging anything on top of the debt itself. This guide is general information, not legal advice.
How ARS Financial uses them
When a debtor on one of our cases genuinely can’t pay in full, we agree a realistic payment plan, get it in writing, and follow up on every instalment, all visible in your portal. See how our debt recovery works.
Frequently asked questions
Yes. A properly signed acknowledgement of debt is binding, and it’s strong evidence of the debt if you need to go to court.
Yes. When the debtor acknowledges the debt, prescription is interrupted and a fresh three-year period starts from that date.
Witnesses aren’t always legally required, but having two witnesses sign makes it much harder for the debtor to dispute their signature later.
Yes. Make sure an authorised person signs for the business, and consider asking the directors to sign a written suretyship as well.
Hand us the invoice. We’ll take it from here.
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