In the books of a bank or credit union, “writing off” a loan sounds like the end of the road. The loan comes off the balance sheet, the provision has already been made, and the case stops appearing in the risk unit's reports. For many institutions, that's the end of the story.
It isn't. A write-off is an accounting decision, not a legal one. The obligation still exists, the debtor still owes, and the institution retains its full right to collect. The law itself says so, in no uncertain terms. What changes is that nobody looks at that portfolio again —and that, not the law, is what turns it into a loss.
What writing off a loan actually means
Writing off means removing an already-provisioned loan from the books so it no longer appears as an asset. It's a balance sheet adjustment: it acknowledges that the institution doesn't expect to recover that amount through ordinary means and clears the financial statements of a figure that no longer reflects reality.
What it is not: a debt forgiveness, a discount or a waiver of collection. Nobody forgave the debtor anything. The institution simply stopped counting that money as its own until it comes in.
That difference between “written off” and “extinguished” is what opens up the entire discussion in this article.
When debt is written off in Ecuador
The rule is in article 207 of the Organic Monetary and Financial Code (Código Orgánico Monetario y Financiero):
“Entities of the national financial system shall write off in their accounts any loan, discount or other unrecoverable obligation […]. The period of delinquency that must elapse for a financial entity to write off these obligations shall be determined by the Monetary and Financial Policy and Regulation Board (Junta de Política y Regulación Monetaria y Financiera) […], and may not exceed three years”.
Two clarifications worth keeping in mind, because they are often misquoted:
Three years is the ceiling, not the deadline. The law sets the maximum. The specific period is set by the Monetary and Financial Policy and Regulation Board (Junta de Política y Regulación Monetaria y Financiera) based on the type of loan and the assessment of the default. For certain products it can be considerably shorter, so a portfolio can reach write-off sooner than most people assume.
Some deadlines are shorter than you'd think. For entities supervised by the Superintendency of Banks (Superintendencia de Bancos), the rule implementing write-offs sets the obligation at three years of delinquency, but cuts the period to one hundred eighty days past due on an installment or payment for consumer and microcredit loans rated by scoring. A consumer portfolio can be written off much sooner than most people assume.
And early write-off exists. An entity can ask the Superintendent for authorization to write off before three years, provided the loan is provisioned at 100 % of its book value, rated in risk category “E Loss”, and the reasons for the request are documented (Circular SB-IG-2024-0018-C, of March 5, 2024).
A write-off requires prior 100 % provisioning. The same article mandates it: “Prior to writing off obligations, they must be provisioned at 100% of their book value”. This has practical consequences: when a portfolio is written off, the institution has already absorbed the entire loss in its books. Everything that comes in afterward is net recovery.
What a write-off doesn't do
Here is the sentence that should be posted on the wall of every recovery unit. It's in the same article 207:
“this write-off does not release it from continuing to collect the sums owed, nor does it relieve the borrower of their status as a delinquent debtor”.
These are two distinct consequences, and both matter:
- The institution remains obligated to collect. Writing off doesn't close the case or authorize it to stop working it.
- The debtor remains delinquent for all purposes. Their record wasn't wiped clean.
The only case in which the law does release an entity from collecting is that of entities in liquidation, and only for obligations not exceeding fifty dollars. Outside that case, a written-off portfolio is a living portfolio.
Why a written-off portfolio can be recovered
The underlying reason is simple: the debtor of three years ago is not the debtor of today.
A portfolio is written off based on the debtor's situation at a specific point in time. But situations change, and they almost always change in ways that leave a trail:
- The one who was unemployed went back to salaried work and now shows up in the IESS (Ecuadorian Social Security Institute) records.
- The one who operated informally set up a company and now has a RUC (tax ID), invoicing and a business reputation to protect.
- The one who had nothing in their name inherited, married under community property, bought a vehicle or real estate.
- The one who left the country came back.
- The one who now needs a loan, a license, supplier qualification or a contract discovers they still carry the delinquent-debtor status that the write-off, precisely, did not erase.
That last point is the one that produces the most recoveries, and it's a direct consequence of the law. A debtor who needs to get back into the system has a real incentive to negotiate, and often they are the ones who reach out to the institution. The problem is that on the other side, nobody is following up anymore.
What to review before working a written-off portfolio
Not every written-off portfolio deserves the same collection investment. Before touching a single case, three things define the outcome:
The statute-of-limitations status. Article 2415 of the Civil Code (Código Civil) sets five years for enforcement actions and ten for ordinary actions, and adds something that is often overlooked: “the enforcement action becomes an ordinary action after five years; and once converted into an ordinary action, it shall last only another five”. The clock runs from when the obligation became due (art. 2414). And it is interrupted in two ways (art. 2418): naturally, when the debtor acknowledges the obligation expressly or tacitly —a partial payment is tacit acknowledgment—, and legally, with service of the lawsuit. That's why a small forgotten payment from two years ago can completely change the status of a case that seemed lost on paper. It's the first thing to establish, loan by loan.
The file. A loan written off years ago often has its promissory note archived in another warehouse, the collateral not updated and the last known address out of date. Without a document there is no instrument, and without an instrument there is no enforcement. Rebuilding the file is part of the job, not a prerequisite.
Current whereabouts. The phone numbers and addresses in the original file are almost never useful. Working a written-off portfolio starts with locating the person again and understanding their current financial situation, not the one they had when they stopped paying.
Those three variables drive the segmentation: what goes to court, what is negotiated out of court, what is offered with payment facilities and what, honestly, isn't worth the effort. That segmentation is what makes the difference between a profitable recovery campaign and a call list with no strategy.
How we approach it at FEXCOB
When an institution hands us a written-off portfolio, the first deliverable isn't collection work: it's an assessment. Our portfolio audit reviews the documentation status, the statute-of-limitations situation and the contact and asset information for each block, and returns the portfolio segmented by recovery route before a single dollar is spent working it.
From there, we work each segment with the right team. In receivables recovery for banks, credit unions and lenders we have spent more than twenty years doing exactly this in Ecuador, Colombia and Peru, with our own team in each country and more than USD 20 million recovered for the financial system.
In summary
A written-off portfolio has left the balance sheet, not the law. The same rule that requires the write-off states, in the same sentence, that it does not release the institution from continuing to collect, nor relieve the debtor of delinquent status. What makes it unrecoverable isn't the passage of time on its own: it's no longer looking at it.
If your institution has written-off blocks that haven't been worked in years, the first step isn't to start calling. It's to find out what's in there.
You may also be interested in: when to send a debt to legal collections · how a debtor's assets are legally located · sell the portfolio or work it
Legal sources cited: Organic Monetary and Financial Code (Código Orgánico Monetario y Financiero), Book I, article 207 (current text, last amended June 4, 2026); Codification of Resolutions of the Superintendency of Banks (Superintendencia de Bancos), Book I, Title IX, Chapter I, on write-offs of loans and other risk assets; Circular SB-IG-2024-0018-C, of March 5, 2024, on early write-offs; Civil Code (Código Civil), articles 2414, 2415 and 2418 (current text, last amended November 26, 2025).
This article is for informational purposes only and does not constitute legal advice for any specific case.