When it comes to debt collection, there are rules surrounding the length of time that a creditor or collection agency can take legal action against you.

This guide explains the statute of limitations on debt in Canada.

You’ll learn how long a creditor has to take legal action, how debt collectors can add more time and the rules where you live.

What’s the statute of limitations on debt in Canada?

If you have an outstanding debt but haven’t made any payments or heard from the creditor, you may wonder if you still owe the money.

There are laws governing how long creditors or collection agencies can pursue legal action against you for unsecured debt in Canada, known as a statute of limitations.

If a debt is not collected within the time limit, creditors and collection agencies cannot take legal action; the debt is no longer legally enforceable.

In the simplest of terms, if you don’t make payments towards your debt or acknowledge the debt—in writing or verbally—for the limitation period, a creditor cannot pursue legal action.

However, if the time limit hasn’t passed, creditors and collection agencies can still take legal action and obtain a court judgment, which can lead to:

  • A wage garnishment or a bank account levy.
  • Seizure of personal property.
  • A lien against your property.

The limitation period begins when you last acknowledged the debt or last made a payment, and the length of time varies depending on where you live in Canada.

Canada debt statute of limitations by province or territory

The federal statute of limitations on debt collection in Canada is six years, but provinces and territories have their own limits varying from two to six years.

  • Alberta: 2 years*
  • British Columbia: 2 years
  • Manitoba: 6 years
  • New Brunswick: 6 years
  • Newfoundland and Labrador: 2 years
  • Nova Scotia: 6 years*
  • Ontario: 2 years
  • Prince Edward Island: 6 years
  • Quebec: 3 years
  • Saskatchewan: 2 years
  • Nunavut, Yukon and Northwest Territories: 6 years

* If there is a court judgment before the original statute of limitations expires, it can be extended to 10 years.

The Statute of Limitations on Debt in Canada

If the statute of limitations for the debt has passed

If the statute of limitations has expired, debt collectors can no longer take you to court to collect the debt. When legal action is no longer possible, they may stop pursuing you, especially if you have no income or assets.

But, you still owe the money, so they can still contact you to try to make you pay. You might still receive phone calls, text messages, letters and emails from them.

If a collection agency tries to sue you for an old debt, you can use the expired limitation period to file a Statement of Defense. This will notify the court that the debt is too old to collect. It is crucial to respond to this action.

Making a partial payment or acknowledging the debt will reset the limitation period, and the time starts again. If you don’t inform the creditor of a change of address or telephone number, this can also increase the statute period.

If a Collection Agency Contacts You in Canada - Dos and Don'ts

If you don’t pay a debt in collections, it stays on your credit report for up to seven years. As a result, it damages your credit score, making it hard to borrow money, and you may pay a higher interest rate.

If you have no income or assets, you might want to consider letting a limitation period for an unsecured debt expire. But before you decide, consult a Licensed Insolvency Trustee for advice.

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If the statute of limitations for the debt has not passed

If the statute of limitations has not expired, the debt collectors can still take legal action to collect the debt.

If you have income or assets, look to resolve your financial difficulties and pay the debt. If you don’t, legal action might commence, resulting in wage garnishments or confiscation of assets.

While this debt remains unpaid, it will damage your credit score.

Can the statute of limitations be used to resolve my debt?

If you have no income or assets, you’re considered judgment proof, and you might be able to use the statute of limitations to resolve your debt.

Even if you’re unemployed with no assets, legal action could occur if there is a change in your circumstances during this time.

If you owe money to a bank and have other accounts with them, the bank can exercise its right of set-off, which lets them take money from another account to pay the debt.

For example, if you owe credit card debt, the bank could take money from your chequing account to pay it back.

While some collection agencies may stop chasing you for the debt after the limitation period ends, some may contact you indefinitely.

The first step is to find out how old the debt is. Many creditors sell old debts to debt collection agencies who attempt to trick customers into acknowledging the debt, which resets the limitation period.

Even if you successfully wait out the limitation period, bad debts can damage your credit score, so it’s best to pay your debts if possible.

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Statute of limitations on government debts

There are exceptions for government debts, so debts such as taxes and student loans are not subject to these rules and can be collected indefinitely.

How re-aged debt works

Debt collectors can reset the statute of limitations, giving them more time to collect a debt. This is called re-aged debt.

This happens if you:

  • Make a payment towards your debt.
  • Acknowledge that you owe the money or state that you intend to pay.

This is why you must be extremely careful what you say to a creditor or collection agency, as you could unwittingly reset the limitation period.

When do debt collection agencies give up?

Once a collection agency has lost the ability to take legal action, they may give up and stop chasing you for the debt. But a debt collector can contact you indefinitely to collect the money owed.

Know the Canada debt statute of limitations where you live

Hopefully, this article has given you an understanding of Canada’s statute of limitations on debt.

To find out how long a creditor or collection agency can pursue legal action against you, check the statute of limitations in your area.

If you are struggling to pay off debts from collection agencies, you can talk to a Licensed Insolvency Trustee for free.

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  • Experienced trustees
  • Local offices
  • Personalized plan
  • No fees
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