Understanding the Statute of Limitations and Debts in BC
In the realm of finance and debts, one term that often surfaces is the Statute of Limitations. This term holds considerable significance, particularly for those grappling with debts. This article delves into the concept of the Statute of Limitations and Debts in BC (British Columbia), shedding light on its implications, exceptions, and related aspects.
Unraveling the Concept: Statute of Limitations
In the legal world, the Statute of Limitations refers to a law that sets the maximum period within which legal proceedings can be initiated. Every province in Canada has its own Limitations Act outlining the time frame for launching legal action for various claims.
In the context of British Columbia, the Limitations Act defines the period within which a creditor can initiate legal action to recover a debt. In 2013, this period was reduced from six years to two years. This two-year period begins from either the date the debt was last acknowledged or the last payment was made.
The Two-Year Limitation Period: An Insight
When it comes to consumer debt, the two-year basic liability limitation period in BC begins from:
- The date the unsecured debt was incurred.
- The date of the last payment made against the debt.
- The last written acknowledgment of the debt by the debtor.
This implies that creditors cannot sue you if it has been two years or more since you incurred the debt, made a payment, or acknowledged the debt. However, it’s crucial to understand that there are exceptions to this rule, and certain actions can reset this period.
The Debt Doesn’t Just “Disappear”
While the Statute of Limitations prevents creditors from suing or taking other legal action against you, it doesn’t stop them from contacting you about the debt. They can still call you, send you letters, or impact your credit score by noting the outstanding debt on your credit history.
Many individuals with old “statute barred” debts opt to officially write-off their debts by making a Consumer Proposal or filing personal bankruptcy. This ensures a ‘clean slate’, allowing their credit history to start fresh, without the burden of debt!
Resetting the Limitation Clock
The limitation period can be extended if the debt is acknowledged within the two-year period, thereby restarting the limitation clock. A debt is considered acknowledged when the following occurs:
- A payment is made, even if it is partial.
- The debt is acknowledged in writing, either manually signed or electronically.
- Email exchanges that sufficiently identify the parties can also be considered an acknowledgment of a debt.
What Happens to Statute-Barred Debts?
After a debt is considered statute-barred, the creditor cannot sue you for the amount owed. However, this doesn’t mean the debt vanishes. Some collection agents may continue to try to collect old debts by sending notices, emails, texts, or making collection calls. If they convince you to start making payments, this does not restart the limitation period.
Credit Rating and Statute-Barred Debts
A statute-barred debt may continue to reflect on your credit report as a bad debt for six to seven years from the date of the first missed payment. This can make it challenging and expensive to obtain credit in the future. However, a Licensed Insolvency Trustee can provide solutions to deal with long-outstanding debts and offer information about clearing your credit rating.
Special Cases: Judgment Creditors and Government Debts
For debts where the creditor has sued and obtained a judgment, the limitation period for enforcement extends to ten years. There are also different limitations for the collection of income tax debts, student loans, and other government debts.
Personal income tax debts come under the Federal limitation period of six years. However, business GST or payroll source deduction debts have no limitation period. Student loan debts have different limitation periods based on whether they are federally funded or privately funded.
Consult a Professional
Using the Limitations Act as a debt management strategy can be appealing. However, without professional advice, you may unintentionally restart the limitation period or discover too late that your debt does not fall under the basic two-year limitation period. If you’re struggling with an overwhelming amount of debt, consult a professional for confidential and free advice.
Conclusion
Understanding the Statute of Limitations and Debts in BC is crucial for anyone grappling with debts. It serves as a protective shield, limiting the time within which creditors can take legal action to recover debts. However, it doesn’t mean that the debt disappears, nor does it stop creditors from contacting you about the debt or impacting your credit score. Therefore, consulting a professional is advisable to explore all possible avenues for managing your debts effectively.
