Do debts ever expire or can they always be pursued?<\/strong><\/p>\n It can come as a surprise to some businesses to learn that their unpaid accounts must be recovered within a certain time frame. As is the case with all court proceedings, there is a statute of limitations governing the time limit in which you can take legal action to collect a debt. Once a debts limitation period has expired, it becomes \u201cstatute-barred debt\u201d and it becomes impossible to take legal action to recover it.<\/p>\n These time limits vary across different States and Territories in Australia, and are governed by a number of federal and state laws, meaning the jurisdiction where your debtor has incurred their debt becomes significant.<\/p>\n Here\u2019s a quick recap of the facts relating to the statute of limitations in regards to debt collection and statute-barred debt.<\/p>\n What is a statute-barred debt?<\/strong><\/p>\n When you have a debt, the creditor will have the right to sue you for a certain period of time once the debt becomes overdue. This period of time is known as the \u201cstatute of limitation\u201d. Debts which have existed longer than the statutory limitation period, also known as statute-barred debts, can no longer be legally pursed.<\/p>\n The length of time a debt can be pursued and the consequences for what happens when a limitation period expires varies. For example, in NSW a debt is wholly extinguished when a limitation period expires, in other States and Territories the debt will still remain, but there will no longer be any legal remedy to pursue the debt.<\/p>\n What are the time frames?<\/strong><\/p>\n For simple contracts (including unsecured personal loans or credit cards, and generally most debts handled by collection agencies), the limitation period is six years for all States, but in the Northern Territory it is three years.<\/p>\n When a debt follows a court judgment, the limitation period is longer: 12 years for all States and Territories, except South Australia and Victoria, which have a 15 year limitation period.<\/p>\n For specific State and Territory statute of limitation laws, you can visit the individual state government legislation website below;<\/p>\n Australian Capital Territory \u2013 Limitation Act 1985<\/a> Some debt collection agents may not be fully apprised of the legislation surrounding statutes of limitation. Some may believe, erroneously, that so long as they have not successfully been able to contact a debtor during the limitation period, that the limitation period has not yet commenced. Don\u2019t be afraid to ask your debt collection agent if they have read the applicable statute for your jurisdiction. A reputable agent will be happy to reassure you on this point.<\/p>\n When does the limitation period start and how can it be \u201creset\u201d?<\/strong><\/p>\n Typically, a limitation period begins at the time a debt becomes overdue.\u00a0 However, the limitation period can also be reset. This can occur if the debtor acknowledges the debt in writing, or makes a payment or enters a payment arrangement.\u00a0 At this point, the limitation period begins afresh.<\/p>\n Whether or not the limitation period can be reset will also be determined by jurisdiction. For example, in South Australia, Queensland, Western Australia and Tasmania, the limitation can be reset repeatedly. However, in New South Wales, ACT and the Northern Territory, the limitation period does not reset once expired.<\/p>\n Attempting to take advantage of a debtor\u2019s unfamiliarity with the law and with limitation periods is strictly forbidden. Debtors may or may not be aware that communicating with their creditor about a debt can restart the debt\u2019s limitation period, and they must not be tricked or coerced into signing a written acknowledgment that may reset their debt\u2019s limitation period.<\/p>\n What happens if collection activity occurs after a limitation period has expired?<\/strong><\/p>\n Above all, creditors and debt collectors must not act in a manner that may mislead the debtor into thinking the creditor still has the right to take legal action over the debt when they do not.\u00a0 The rules vary across the States and Territories, with particular States having certain extra restrictions on how statute-barred debt may be collected. This may mean, for example, that collection agencies must explicitly inform debtors that the limitation period has expired.\u00a0 Creditors are not allowed to mislead a debtor that a debt is still current or in existence, especially in NSW where the law cancels debts after their limitation period expires.<\/p>\n In terms of potential legal action against a creditor or their debt collection agent, if a debtor does pay a statute-barred debt, the payment itself can indicate wrongful collection behaviour has occurred on the creditor\u2019s part. The burden then rests with the creditor or their debt collection agent to prove to a court that the transaction was in fact reasonable, fair and just.<\/p>\n
\nNew South Wales \u2013 Limitation Act 1969<\/a>
\nNorthern Territory \u2013 Limitation Act 1981<\/a>
\nQueensland \u2013 Limitation of Actions Act 1974<\/a>
\nSouth Australia \u2013 Limitation of Actions Act 1936<\/a>
\nTasmania \u2013 Limitation Act 1974<\/a>
\nVictoria \u2013 Limitation of Actions Act 1958<\/a>
\nWestern Australia \u2013 Limitation Act 1935<\/a><\/p>\n