Is There a Statute of Limitations in BC?
If you have a long-outstanding debt that you have been unable to pay and you haven’t been in contact with the creditor for some time, you may be wondering: Is there a statute of limitations in BC? Furthermore, what does it mean when a debt becomes statute-barred?
In Canada, most provinces have what is called a Limitations Act. These Acts set out how long a person has to take legal action for certain types of claims.
Limitations in BC
The Limitations Act of British Columbia sets out the limitation periods in which a party may start legal action on certain types of claims. When it comes to debt, the province reduced the limitation period from six years to two years in 2013. This two-year limitation period starts to run from the date the last payment was made or the date the debt was last acknowledged.
If you have not made a payment or neither you nor the creditor have acknowledged the debt for a period of two years or more, the debt is considered to be statute-barred. A statute-barred debt is uncollectible through the Courts and according to the Limitations Act, it is also uncollectible by any other collection method.
Extension of Limitation Periods
The limitation period may be extended when the acknowledgment of debt occurs within the two-year period thereby restarting the clock for another two-year limitation period.
A debt is considered to be acknowledged when something like the following occurs:
- you make a payment, even if it is a partial payment;
- when you or the creditor acknowledge the debt in writing, signed by hand or electronically;
- email exchanges may be considered an acknowledgment of a debt if the emails have sufficient information to identify the parties.
What Happens to My Statute-Barred Debt?
Once a debt is considered to be statute-barred, the creditor can no longer sue you for the amount owing. Unfortunately, this does not necessarily mean that the debt just goes away.
The Limitation Act clearly states that once the limitation period has expired, the creditor is not able to use any ‘non-judicial remedy’ to collect on the debt. However, it is often the case that some unscrupulous collection agents will continue to try to collect on old debts. This may be by the usual methods of sending collection notices, emails, and text messages, as well as making bothersome collection calls to you and possibly your family members.
If a collection agent was able to convince you to agree to start making payments on the debt at this point, this would not restart the limitation period clock.
Without the ability to take legal action to recover the debt, the creditor may eventually stop trying to collect.
When consumers receive collection action on a debt that they believe should be statute-barred, they can contact Consumer Protection BC or the Financial Consumer Agency of Canada to report the matter.
Credit Rating Issues
The statute-barred debt is also likely to continue to show on your credit report as a bad debt for six to seven years from the date of the first missed payment. The effects of the continued reporting of bad debt on your credit rating can make it quite difficult and costly to obtain credit in the future.
For some folks, they are at a stage in their lives when they really have no use for credit as they may have limited income and assets, and they do not expect to be in the market to purchase a vehicle or real estate in the future. In this situation, the effect of having a bad debt showing on their credit rating may not be of great concern to them.
If your credit rating is of concern to you, a Licensed Insolvency Trustee can offer solutions to deal with long-outstanding debts. They can provide you with information regarding the length of time it would take to tidy up your credit rating clearing the way for future opportunities.
Ten-Year Limitation Period for Judgment Creditors
For those debts where the creditor has already sued and obtained a judgment through the local Court system, the limitation period for enforcement of such a judgment is increased to ten years.
Income Tax, Student Loans & Other Government Debts
There are different limitations for the collection of income tax debts, student loans, and other government debts.
For personal income tax debts, the Federal limitation period is six years. However, the Canada Revenue Agency regularly sends out notices of income tax balances owing, so that the six-year limitation clock may be restarting at regular intervals.
If you owe the Canada Revenue Agency for Business Goods and Services Tax or payroll source deduction debts, there is no limitation period and these debts remain collectible until they are paid in full.
Canada Student Loan and Canada Apprentice Loan debts fall under the Federal six-year limitation period, while privately-funded student loan debts fall under British Columbia’s basic two-year limitation period.
When to Seek Information from a Professional
Using the Limitations Act as a strategy for dealing with your debt may sound appealing. However, without the right information from a knowledgeable professional, you may end up inadvertently restarting the limitation period clock. You could also find out after two years that the particular debt you have does not fall under the basic two-year limitation period.
If you have accumulated an unmanageable amount of debt, whatever the source, we can provide you with information as to what options are available to help alleviate the heavy burden that you may be carrying. Consultations are free and confidential. Having the information you need to make a decision that allows you to move forward is the first step toward gaining control of your future finances.