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Is There a Statute of Limitations on Debt?
If you’re haunted by old debts that you’ve defaulted on, you may be wondering if there’s any time limit on how long the company has to come after you for repayment — a statute of limitations on your debt. The short answer is yes, there is. The longer answer, however, is that it’s not as simple as it sounds, and there are a lot of underlying considerations. Here’s the scoop.
Each province has its own statute of limitations with regard to how long companies can try to collect a debt from you, either on their own or through the courts. In Ontario, for instance, the limit is generally two years. Basically, this means that if you haven’t made a payment on a debt for two years or more and the company hasn’t taken you to court over the matter, the debt might be considered null and void. BUT, before you decide to stop paying your debts and wait out this time period, you need to understand that there are serious consequences to doing so.
First, remember that any unpaid debts may show up on your credit rating for six to seven years after you default. This can make it more difficult for you to get new credit, obtain a mortgage, rent a home or vehicle, and in some cases, even get a job.
Second, if your debt is held by the bank where you keep your savings and/or chequing accounts, the bank has the right of set-off: this means it can seize money from your account(s) in order to pay your debt without your knowledge or permission.
A third potential consequence is that your creditor may sell off your debt to a collection agency. Some of those agencies will treat the debt as a new one, ignoring the statute of limitations altogether. This behaviour isn’t legal, but it’s a trick that’s used anyway, and if a collector can get you to acknowledge the debt in writing, the clock starts all over again on the limitation time period. Many an unsuspecting debtor has been caught in this trap.
Finally, and perhaps most importantly, ignoring your debts doesn’t address the underlying problem of how you got into financial trouble in the first place — and it won’t solve those troubles, either. It’s far better to seek professional help instead, and to put yourself on the road to financial recovery. No matter how bad the situation seems, you do have options. Talk to an accredited credit counsellor or licensed trustee today, and find out what those options are.