Trade Finance
Buyer Stopped Paying? Your Recovery Playbook (2026)
A stopped buyer is two problems: the money, and the paperwork that decides whether anyone helps you get it. Triage in week one, protect the insurance deadlines, then climb the recovery ladder.
The Friday-evening answer — triage before grief
The email that ruins the weekend is always short: the buyer is not picking up, the due date passed, the money is not coming. The instinct is to chase — call, threaten, offer discounts for immediate payment. Some of that helps. But the highest-value work in week one is unglamorous: freeze the exposure, preserve the documents, and protect the insurance and bank positions that will fund everything after. Recovery is a process with deadlines. Miss the early ones and the later ones stop mattering.
What this post is not
This is the response playbook — what to do after non-payment. For preventing the next one, the companion guides on vetting buyers and structuring 90-day terms are linked at the end; read them before the next order, not after the next default.
Tell trad the dues and the buyer
Share the overdue amount, buyer and country — see the recovery options for your exact position, from agency routes to claim eligibility.
Check your recovery options →Week one: the triage checklist
Do these in order, before the anger phase spends your leverage. Each item takes hours; each omission costs months.
- Fix the facts: the exact due date per the contract (not your memory of it), the amount outstanding, and whether any part payment arrived that changes the figure.
- Preserve everything: contract or PO, commercial invoice, packing list, bill of lading or airway bill, delivery and acceptance proof, inspection certificates, and the full correspondence thread — export it now, before anyone's mailbox policy deletes it.
- Stop the bleeding: hold any further shipments, do not release documents under your control, and alert your freight forwarder if goods are still in transit.
- Check your cover: is the insurance policy in force, was premium declared on this shipment, is the buyer-wise limit valid, and are overdue declarations up to date.
- Inform your bank in writing: the bank handling your documents is your first ally and your first auditor — it learns about the default from EDPMS with or without your call.
- Send the first formal demand: amount, contract reference, deadline — firm, professional, and copied to counsel if you have any. This letter opens the paper trail every later step stands on.
Protect the insurance — the deadlines that void claims
Insurance does not pay exporters who had insurance. It pays exporters who complied with insurance. The claim machinery has three clocks, and all three start without you.
| Clock | Rule | What kills it |
|---|---|---|
| Overdue declarations | Debts unpaid 30+ days past due, declared monthly by the 15th of next month | Skipped declarations — non-declaration is a listed exclusion |
| Waiting period | Four months from due date for protracted default; insolvency earlier if loss admitted to rank | Filing before loss is ascertained — the claim is premature, not early |
| Claim filing | Within 360 days of the due date, complete with all supporting documents | Late or incomplete filing — delay condoned only for reasons beyond your control |
Two further trip-wires: any extension of the buyer's due date needs the insurer's prior approval, and any new exposure to that buyer while dues are overdue can void enhancements. The claim is paid through the bank that handled your documents, straight against the post-shipment advance — which is also why the bank from week one matters. And note what the waiting period means practically: months one to four are for agency recovery and negotiation, with the claim file being built in parallel so it lands complete the day the period expires.
How export credit insurance actually works
Coverage percentages, credit limits, premium mechanics and the SMILE portal — the policy mechanics behind the deadlines above.
Read the ECGC policy guide →The recovery ladder — cheapest effective step first
Climb in order. Most recoveries settle on the lower rungs; each higher rung costs an order of magnitude more and should be reserved for dues that justify it.
| Rung | When it fits | Cost and enforceability |
|---|---|---|
| Direct negotiation | Buyer responsive, cites cash-flow or disputes | Free; get any promise in writing — a written acknowledgement extends limitation and anchors later steps |
| Legal notice via counsel | Buyer stalling or silent after demand | Low flat fee; prerequisite for most proceedings and proof of good-faith pursuit for the bank file |
| Collection agency | Dues below ~USD 20,000, buyer trading | Contingency 15–25% of recovery, no collection no fee; commercial pressure, no legal compulsion |
| Arbitration | Dues above ~USD 50,000 with an arbitration clause | Tribunal and counsel fees; award enforceable in 170+ countries under the New York Convention |
| Foreign suit | No arbitration clause, buyer has local assets | Local counsel, years of timeline; enforcement depends on the jurisdiction's recognition rules |
Two points practitioners stress. First, act quickly: limitation periods run in the buyer's jurisdiction as well as yours — generally three years from default under Indian law — and debtors in trouble pay whoever applies pressure first. Second, document everything from day one: signed contracts, delivery notes and written acknowledgements are what make every rung above negotiation possible, especially where the buyer's courts require them to start legal action.
Keep the bank and the regulator on your side
While you chase the buyer, a second file runs at home. Every export sits in EDPMS against your name, and an unpaid bill becomes an outstanding entry the system never forgets. Your AD bank must follow up overdue bills, report outstandings, and escalate cases — laxity on either side draws FEMA attention, with penalties that can multiply the original due.
- Seek extension of realisation time before it lapses: AD banks can extend up to six months at a time, and exporters hold self-extension room within 10% of proceeds — use it early, not after the deadline.
- If recovery genuinely fails, write off through the proper tier: self, AD-bank-authorised with full recovery documentation, or RBI for large cases — bills settled by ECGC or IRDA-regulated insurers write off outside the percentage limits.
- Remember the bank's recourse: standard bill purchase and discounting carry recourse, so the unpaid advance is already sitting as your liability — the claim or recovery repays it, and crystallisation may already have converted the currency exposure.
- Close the loop: a completed write-off clears the EDPMS entry and ends the penalty exposure. An ignored outstanding does the opposite, compounding silently.
Prevent the next one
Every default teaches the same five lessons, and they are all cheaper before the order than after it: vet the buyer through registry, report, financials and shipment history; grant long terms only to buyers who have earned them; put an arbitration clause with seat and governing law in every contract; hold an approved buyer-wise limit before shipment; and cap any single buyer's share of your book so one default is a wound, not a funeral.
Vet the next buyer before you ship
Registry, credit report, financials, shipment history, country risk — the five-layer diligence sequence that keeps bad buyers off your book.
Check buyer creditworthiness →Grant long terms without funding them yourself
Pricing the loan, two-price quoting, cover-first sequencing and funding the gap — the safe way to say yes to extended credit.
Read the 90-day credit guide →Tell trad the dues and the buyer
The useful answer needs three facts: how much is overdue and since when, who the buyer is and where, and what cover and documents you hold. With those, trad maps your position — agency route, claim eligibility, bank-file actions — against the deadlines that are already running.
Start the recovery this week
Send the overdue amount, buyer and country — see the recovery options and the claim deadlines for your exact situation.
Tell trad dues + buyer →Frequently asked questions
My foreign buyer has stopped paying — what do I do first?
Triage, in this order: confirm the exact due date and whether any part payment arrived; preserve every document (contract, invoice, bill of lading, delivery proof, correspondence); stop further shipments to that buyer immediately; check whether your credit insurance and buyer limit are in force; and inform your bank. The first week's job is not recovery — it is stopping the loss from growing and protecting the claims and covers that fund recovery.
What are the ECGC deadlines after a buyer defaults?
Three clocks run. Declare overdue payments monthly — debts unpaid 30+ days after due date, reported by the 15th of the next month. The waiting period for protracted default is four months from the due date (for insolvency, four months or one month after your loss is admitted to rank, whichever is earlier). And the claim itself must be lodged within 360 days of the due date. Missing the declarations or the filing window can void the claim entirely — diary all three on day one.
Should I use a collection agency or go to arbitration?
Match the tool to the debt. For smaller dues, an international collection agency working on contingency (typically 15–25% of recovery, no collection no fee) is usually more practical than formal proceedings. For larger disputes — roughly above USD 50,000 — arbitration generally beats litigation: India is a New York Convention signatory, so the award is enforceable in 170+ countries, while an Indian court judgment is not automatically enforceable abroad. But arbitration needs an arbitration clause in your contract — without one, you need the buyer's post-dispute agreement, which rarely comes.
Can I stop or divert goods already shipped to a defaulting buyer?
Sometimes, if you still control the documents. If the bill of lading is unreleased and documents have not been handed over, talk to your bank and freight forwarder immediately about stopping delivery or changing the consignee — banks handle this routinely, and RBI directions expressly provide for change of buyer. Once the buyer holds the documents and the goods, diversion is over and recovery becomes a money claim, not a goods claim. Speed decides which one you have.
What if the buyer claims the goods were defective?
Treat a quality dispute as a different case from a payment default, because your insurer will. Where the buyer refuses to accept or pay over alleged non-performance, claims are generally considered only after the dispute is resolved and the payable amount established — sometimes requiring a decree in the buyer's country. Keep inspection certificates, survey reports and pre-shipment correspondence precisely for this moment: the exporters who win disputes are the ones whose paperwork was built before the dispute existed.
How do I clear an unrecoverable due from my RBI/bank records?
Through write-off, which is a regulatory process, not an admission of failure. Exporters can self-write-off and extend realisation within 10% of export proceeds; AD banks can authorise more with full documentation of recovery attempts; larger cases go to RBI. Bills settled by ECGC or IRDA-regulated insurers can be written off outside the percentage limits. A clean write-off closes the EDPMS outstanding entry and removes the FEMA penalty exposure — but it needs the recovery trail (correspondence, notices, agency reports, claim outcome) to support it.
How long does export payment recovery take?
Amicable settlement through an agency typically resolves in weeks to a few months from first formal contact. ECGC claim investigation and payment typically takes a few months after a complete filing. Arbitration runs six to twelve months to an award, then enforcement time in the buyer's jurisdiction. Court litigation is measured in years. The pattern is consistent: every week of delay in week one adds months at the end, because limitation periods run, assets move, and buyers in trouble pay whoever shouts first.