The month escheatment said $18,470 of expired credits was never mine, at $60K MRR

That was my accountant, replying to what I thought was the dullest line item I had ever sent her. I was at $60,000 MRR, tidying the balance sheet before a year-end review, and I wanted to write off $18,470 of customer account credits that had sat untouched for years. Downgrade prorations. Goodwill credits issued instead of refunds. Duplicate charges resolved by crediting the account. Small amounts, more than a thousand of them, belonging to people who had long since stopped logging in.

Quick answer (2026): This is a composite diary. I write these from patterns across companies I have run and advised, with figures reworked so no single business is identifiable; every statutory citation and every piece of arithmetic below is real and checkable. The short version: a clause in your terms saying unused customer credits expire is void and unenforceable under Delaware's escheat law, so the money stays your customer's, and after a dormancy period it becomes reportable to a state. Which state depends on whether you captured an address good enough to identify one. If you did not, it goes to your state of incorporation. I am a founder rather than a lawyer, and this is meant to show you where to read, not what to do.

The clause I had written myself

Our terms said unused account credits expire twelve months after issue. I wrote that clause, and I was rather proud of it. It was the reason I believed the $18,470 was revenue.

Delaware's unclaimed property law, 12 Del. C. ch. 11, has a section called "No private escheat." Section 1157 says that any provision in a contract or other writing between an owner and a holder "which provides that upon the owner's failure to act or make a claim regarding property in possession of the holder that the property reverts to or becomes the property of the holder is void and unenforceable."

My clause did exactly the forbidden thing: it made the customer's inaction the trigger for the money becoming mine. Not merely unenforceable against a customer who complained. Void, which meant the write-off had no foundation at all.

The definition leaves no gap to stand in

My next move was to argue that a software credit is not the kind of thing the statute means. That took four minutes to abandon. Section 1130 defines "Property" to include "A credit balance, customer's overpayment, gift card, stored-value card, security deposit, refund, credit memorandum" and more. A credit balance and a customer overpayment are named, in the definition, in those words.

My second move was the one most B2B founders reach for: we sell to companies, and many states exempt business-to-business transactions. Delaware anticipated that and closed it in the same subsection. After excluding "uninvoiced payables," it adds: "Nothing in this section shall be construed to create a business-to-business exemption of any kind regardless of whether a current business relationship exists between the holder and the owner."

Note the last clause. Not merely former customers: a live, paying, currently-invoiced account with a stale credit on it is covered too. And "uninvoiced payables," the exclusion that might have helped, is defined narrowly as amounts due "between merchants" for goods ordered, received and accepted but never invoiced. Software credits are not goods.

Two defences that are switched off by name

I had two more instincts, and the statute disables both by name rather than leaving them to argument.

The first was that nobody had asked for the money. Section 1146: "Property is reportable and payable or deliverable under this chapter even if the owner fails to make demand or present an instrument or document otherwise required to obtain payment." The silence I had read as abandonment is the condition that starts the clock, not a defence against it.

The second was that it was all years ago and no customer could sue me now. Section 1156(a) says the expiry of a limitation period on the owner's right to recover, "whether specified by contract, statute, or court order," "does not prevent the property from being presumed abandoned or affect the duty of a holder to file a report or pay or deliver property to the State Escheator".

That is the part I still find strange. The customer's claim against me can be dead while my duty to hand the same money to a state is alive, and 1156(b) gives the state ten years from when the duty arose.

Which state, and why mine was mostly one state

The rule here is older than the statutes. In Texas v. New Jersey, 379 U.S. 674 (1965), the Supreme Court sorted out three states fighting over Sun Oil's unclaimed debts, owed to "1,730 small creditors who have never appeared to collect them." The holding: "each item of property in question in this case is subject to escheat only by the State of the last known address of the creditor, as shown by the debtor's books and records." Where there is no address on the books, the Court allowed "the property be subject to escheat by the State of corporate domicile".

Delaware codifies both halves. Section 1141(a)(1) lets it take custody where "there is no last-known address in the records of the holder of the owner or other person entitled to the property", and section 1130 defines "Domicile" as "For a corporation, the state of its incorporation." We are a Delaware C-corp, like almost everyone reading this.

Then section 1139(a), which is where a self-serve SaaS quietly loses. A last-known address must be an indication on the holder's books "which identifies the state of the last-known address of the owner." Not a country. Not an email domain. Not a card issuer. The state.

I pulled the ledger. Of 1,284 open credit balances, 212 carried something that identified a state. The other 1,072 did not, because we had never asked. Those held $14,339 of the $18,470, or 77.6 percent. A field left off the signup form in year one decided where three quarters of the money went.

The two notice windows do not overlap

Both states require you to write to the owner before you report. I assumed one carefully drafted letter, sent annually, would cover both. It cannot, and the reason is arithmetic rather than drafting.

Delaware, section 1148: notice goes "by first-class United States mail, not more than 120 days nor less than 60 days before filing the report". California, Code of Civil Procedure section 1520(b): "The notice shall be mailed not less than 6 nor more than 12 months before the time when the owner's property held by the business becomes reportable to the Controller".

Delaware's window closes at 120 days out. California's does not open until six months out. They never touch. A single campaign is necessarily too early for one state or too late for the other: two calendars, or a failure in one jurisdiction.

They diverge on medium too: California permits electronic notice "if the owner has consented to electronic notice". Delaware's 1148 says first-class United States mail and stops.

Here is the bind that took me longest to see. Delaware requires the notice only where the holder has an address good enough for first-class mail. So for all 1,072 of my unaddressed accounts, section 1148 excuses me from writing, and section 1141(a)(1) makes those the very accounts Delaware claims. Every dollar Delaware takes is a dollar I am structurally unable to warn anyone about, because one missing field triggers both.

Two clocks on one liability

The dormancy periods differ too. California escheats intangible property "unclaimed by the owner for more than three years after it became payable or distributable". Delaware gives five years, its catch-all running from "the earlier of 5 years after the owner first has a right to demand the property or the obligation to pay or distribute the property arises." So two credits issued on the same day become someone else's property two years apart, depending only on which state claims them. And the catch-all says the earlier of two events, so the clock starts when I issue the credit, not when the customer goes quiet.

The arithmetic, and the line nobody reads

Section 1183 is where I expected the pain. It is not where the pain is. The failure-to-file penalty in 1183(b) is "the lesser of 5% of the amount thereof if the failure is not for more than 1 month, with an additional 5% for each additional month or fraction thereof during which such failure continues, not to exceed 50% in the aggregate or a civil penalty of $100 for each day the report is withheld or the duty is not performed, but not more than $5,000."

It is a lesser-of test whose two legs scale differently. One is a percentage of what you owe, capped at half of it; the other a daily rate capped at a flat $5,000. Set them equal and the crossover sits at exactly $10,000 of unclaimed property. Below that the penalty tracks your liability; at or above it it is flat $5,000 however large the liability gets. The headline penalty is regressive, and stops growing precisely when the problem becomes serious.

The line that matters is 1183(a), interest at 0.5 percent a month, where "Interest due in accordance with this subsection may not exceed 50% of the amount required to be paid." That cap is a percentage, not a dollar figure, so it is unbounded in dollars. On my Delaware share of $14,339 the penalty is $5,000 and the interest cap $7,169.50, bringing modelled exposure to $26,508.50 on money I had already counted as revenue.

One more detail, for anyone hoping delay helps. At half a percent a month the 50 percent cap is reached after 100 months, or eight years and four months. Section 1156(b) gives the state 120 months. The interest sits pinned at its maximum for twenty months before the enforcement window even closes.

The trap in the record-keeping rule

Section 1145(a) says a holder required to file a report "shall retain records for 10 years after the date the report was filed". Read it slowly: the retention clock runs from the filing date. I had never filed, because I believed my expiry clause had made the money mine, so the clock had never started and nothing anchored my records to the exposure period.

Section 1176(a) supplies the consequence. Where a holder has not retained the records, the State Escheator "may determine the amount of property due using a reasonable method of estimation based on all information available to the State Escheator, including extrapolation and the use of statistical sampling when appropriate."

So the chain closes on itself. I wrote a clause the statute voids, so I never filed, so the retention clock never started, so the records that would have bounded my liability were never required to exist, and the gap they leave is filled by an estimate rather than a zero. Each step was individually reasonable. Together they turn a bookkeeping tidy-up into an unbounded number.

What I did was enter Delaware's voluntary disclosure programme, which since 2012 has offered a settlement carrying "a waiver of interest and penalties" and, given the multi-state problem above, "indemnification against other states and claimants". The indemnity is the part worth the paperwork. Handing the money over under 1153(a) also "releases and discharges the holder from any and all liability to the owner": once it is gone it is genuinely gone, and the customer claims from the state rather than from you.

This is the same lesson as the month I could not sue my own customer, in a different chapter of the same code: the paperwork you never did is usually doing something while you are not looking.

What actually happened

What I got wrong

The expiry clause. I thought it converted dormant credits into revenue. Section 1157 makes it void, and I had written it myself.

The statute of limitations. I assumed that if a customer could no longer sue me, the money was safe. Section 1156(a) disables that by name, and 1156(b) gives the state ten years regardless.

The $50 threshold. I read section 1148(2), saw "The value of the property is $50 or more," and concluded my 1,137 sub-$50 balances were exempt. They are exempt from the notice. Section 1142 requires the report, and I found no de-minimis in it at all. The threshold governs a letter, not a liability.

Two things I could not resolve. Whether a SaaS credit is "money or credits owed to a customer as a result of a retail business transaction" under 1133(6), or falls to the catch-all in 1133(17). It does not change the answer, since both are five years, but I could not settle it and will not assert it. Separately, 1130 excludes "a loyalty card" and "game-related digital content" from the definition of property, which raises the obvious question of whether denominating credits in points rather than dollars changes anything. I have not tested it, 1157 would still be sitting there, and that is a question for a lawyer rather than a blog post.

The one thing I would tell you

Read your own terms for the sentence where a customer's inaction turns their money into yours. Almost every SaaS has one, because it is the obvious way to stop credits accumulating forever, and it is the clause most likely to be void where you are incorporated.

Then count two numbers in your billing system: how much you hold in customer credit balances, and how many of those accounts carry an address that identifies a state. The first is what you owe somebody. The second decides who. I had counted neither, for six years, while relying on a clause that assumed the answer.