Statute of Limitations

When Time Runs Out On Debt Collection: Understanding Statutes of Limitations

Collection Agencies  |  2 min read

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. 

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!

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Then what to do?
Fortunately, you have options. Waiting years to get paid should never be one of them. A proactive collection approach can be all that it takes to speed things along.

If debt collection is not your strength, think about hiring a reputable collection agency – check out this site for helpful Canadian collection agency tips. Professional collectors are expert negotiators who specialize in collecting very quickly. At my company, our internal goal is always to collect within 48 hours of getting the green light!

Inform yourself. To download a full listing of statutes of limitations by province or territory, along with pro tips to extend your time and collect debt fast, click the button below

Download Statute of Limitations Info and Pro Tips
Brian Summerflet Author: Brian Summerfelt

President and CEO of MetCredit, Canada's top-performing consumer and commercial collection agency

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