How Long Until Old Debts Become Too Old To Pursue?


How Long Until Old Debts Become Too Old To Pursue?

There are certain time limits that a creditor has to pursue an old debt before it becomes too old to pursue legal action.

This article is for you if you currently have an old outstanding debt and want to know:

  • How long does a creditor have to take legal action
  • What your rights are
  • What you can do when a creditor or collection agency contacts you about an old debt

Because the limitations period for the recovery of debts is governed by state, not national legislation, different jurisdictions will have different limitation periods. Although the majority of jurisdictions in Australia provide standard limitation periods as follows:

  • 6 years for the recovery of debts under simple contract
  • 12 years for debts pursuant to a Court Judgement (15 years in some states)
  • 15 year for debts that relate to a mortgage over property

The slightly different timeframes in different states can make it difficult to know exactly what limitation period applies to your debt before it becomes “Statute Barred” (too old to pursue), so it’s important that you correctly identify the applicable legislation for a given debt before taking any action.

In the case of most debts the limitation period begins from the date…

  • The debt was first due
  • You last made a payment on the debt
  • You last acknowledged in writing that you owed the debt

This again can make it difficult to know if a debt is Statute Barred or is still within the limitation period, depending on the records you have regarding the matter.

If a debt is close to or over the limitation period for your particular debt, then it is recommended to seek professional advice before acknowledging the debt or making payment. Because once you do, the limitation period will start again.

If you are well within the limitation period and there is proof that you owe the debt then it is advisable to work with the creditor or collection agency to set-up a payment plan or negotiate mutually agreeable terms. The reason being if the matter were to go to court you could be liable for interest, as well as legal cost for your and the creditor.

More often than not a collection agency will be willing to discuss affordable payment options that work with your current financial situation.

What they won’t do is forget about the debt if you try to ignore their attempts to settle the debt.

In some cases debt recovery agencies also have the power to register the debt against your permanent credit history, which will affect your ability to get credit for a home or car loan, and may even restrict your access to every day services such as a phone and Internet plans, or getting the electricity connected to a new property in your name.

These are obviously some very good reason why it’s important to deal with outstanding debts before they ruin your credit rating and potentially increase through interest and additional costs.

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