In debt collection, we constantly remind clients that time is the enemy. With every month that passes, your chances of collecting an overdue debt become substantially smaller.
But at a certain point, you (or your collection agency) completely lose the entitlement to take legal action for the money that’s owed to you. That means the debt can still be posted to the credit bureaus and affect the debtor’s credit rating, but you can no longer sue for a legal judgment. We call this “statute barred” debt, and it’s essentially worthless.
In Canada, the statutes of limitations – the laws that limit your ability to sue after an event – vary by province. In some provinces and territories it is up to six years after any of these:
- The date an unsecured debt was incurred;
- the last payment made against it; or
- the last provable acknowledgment of the debt by the debtor.
But in most jurisdictions, the limit is a mere two years. Of course it is dangerous to wait that long in the first place, or the likelihood of collecting becomes statistically very low.
(Looking for the Statues of Limitation on U.S. debt collection in your state? We’ve got that covered for all 50 states at MetCredit USA.)
What about court Judgments?
In most provinces a court judgment is valid for 10 years, and can then be renewed for an additional 10 years. While that may sound fantastic at first, think about it: waiting decades to collect on a debt is a terrible premise for anyone. And according to Statistics Canada, only half of all businesses survive longer than 5 years, so there’s at least a 50-50 chance a debtor company will go out of business in the meantime!