Are you a resident of British Columbia?
Were you aware that there is a statute of limitations on debt?
That’s right, the British Columbia Limitation Act outlines a statute of limitations on debt in the province – here’s everything you need to know.
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What is a statute of limitations?
You may or may not have come across the term statute of limitations before, and so before we go any further, we’re going to outline exactly what a statute of limitations is and what it means for debt in British Columbia.
A statute of limitations is what is known as a prescriptive period, and is a law that has been passed by a legislative body that outlines the maximum amount of time after an event within which legal proceedings can be initiated.
In essence, a statute of limitations is a time limit, after which, any new legal action will no longer be filed or in the event that it is, then it will likely be dismissed by a court.
What is a statute of limitations on debt?
A statute of limitations on debt refers to the time period in which a creditor or other party can sue for a debt owed and outlines when a debtor’s liability begins and ends.
Statute of limitations on debt in BC
Statutes of limitations can vary from province to province, but in British Columbia, the statute of limitations on debt is set at a two year basic liability period.
What this essentially means, is that if it has been two or more years since you incurred your debt, made a payment on your debt or acknowledged the debt, then your creditor is no longer allowed to take legal action against you in order to try and make you pay.
When does the liability limitation period begin?
The liability limitation period will begin on the date that an unsecured debt was incurred and will renew each time a payment is made, or the debt is acknowledged by the debtor.
If the debtor never makes a payment and never acknowledged the debt, then after a period of two years, the liability limitation period in BC will have expired.
If however, at any point during those two years the debtor makes a payment, even of a single dollar, or acknowledges the debt, then the period will renew and the clock will begin to count down from two years again.
What counts as acknowledging the debt?
There are two ways in which a debt can be acknowledged:
- If a payment of any size made on the debt, and,
- If there is any form or written confirmation of liability which includes, letters, emails and text messages.
Acknowledging the debt within the limitation period will restart the time period, but acknowledging it outside of the limitation period will not.
Can your debt harm your credit rating even after the two year period has passed?
Sadly, evidence of the debt will remain on your credit history even once the two-year limitations period has passed, meaning that it will still be impacting your credit rating for many years.
Generally, most negative credit transactions will remain on your credit history for a period of seven years.
Are there any exceptions to the statute of limitations on debt?
Of course, as with any law, there are a few exceptions, the two most important being that:
- The limitation period can be as much as six years in other provinces, so don’t assume that it will be two years where you live, and,
- Not all debts are covered by the limitation period, including civil claims that have a monetary judgement, debts owed to the government such as student loans or payments to Canada Revenue Agency, child support or alimony payments, and payments related to other legal claims such as sexual harassment.
Can the statute of limitations on debt be used to resolve a debt problem?
In some cases, the statute of limitations can be used as a way to solve a debt problem, by simply waiting out the two year period, but this involves tremendous patience and can be a very stressful two years for all parties involved.
Generally, only people with no income at all and no assets to their names are in a position to be able to wait out the two-year liability period and even in these cases the individual can expect to receive an overwhelming number of collection calls and correspondence from their creditors.
If during the two year liability period the debtor gains an asset or starts to earn an income, then their creditor may try to seize this and waiting out the period may no longer be a viable option, not to mention that if, at any point, they acknowledge the debt, then the two year period will restart.
Other ways to resolve your debts
If waiting out the statute of limitation period sounds like a long and stressful approach, then the good news is that waiting out the statute of limitations is not the only way that you can resolve your debts.
There are a number of debt relief services out there designed to help people from all walks of life to get a handle on their debts, including services such as credit counselling, debt consolidation, consumer proposal and bankruptcy.
Here at Bankruptcy Canada, we specialize in helping people to get out of debt and can connect you with one of more than 430 Licenced Trustees from across Canada.
During a free and confidential meeting with your Licenced Trustee, they will be able to assess your financial situation and to point you in the direction of the debt relief service that most suits you.
Whether you could benefit from negotiating with your creditors, consolidating your debts or applying for bankruptcy, a Licenced Trustee will be with you each step of the way and will even be able to liaise with your creditors on your behalf.
To find out more about what we do and how we can help you to start a new life as debt-free, contact us today on (877) 879-4770 or fill out our online form to be matched with a local Trustee.
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