What Is A Statute Barred Debt

What-Is-A-Statute-Barred-Debt

There comes a time when a debts are considered too old by most collection agencies to actively pursue. This generally happens when a debt become “Statute Barred”.

A Statute Barred Barred Debt comes under the Limitation of Actions Act 1958 (Vic) (“LOA Act”), which explains that a creditor only gets a limited amount of time to sue a debtor for a “simple contract” (a simple contract is generally made orally or in writing, not under seal.)

This time period is six years in most Australian states and means that if creditor does not bring relevant court action against a debtor within that time period then the debt is considered “Statute Barred”, and the debtor will have complete defense if the matter was taken to court.

Which in plain english means that the debtor will easily win any court case to recover debts of they are 6 years or older.

Things You Must Know About Statute Barred Debts

In understanding “Statute Barred Debts” completely and how they apply to your situation there are a few other things we must highlight.

The most important being “When does the six year period begin from”?

For most debts accrued under a “simple contract” the time period for a statute barred debt begins from whichever of these events most recently took place;

  • The date the payment was due
  • The date the last payment was made
  • The date that the debtor last admitted to owing the debt in writing

Court Judgements

There are certain cases where a creditor has more than 6 years to collect the debt, these include;

  • When a court judgment has been entered, in which case a 15 year limitation period applies for new actions (such as some bankruptcy proceedings).
  • When the debt relates to a mortgage over property in which case a 15 year limitation period applies.

These issues can make some cases quite complex and to see whether this applies to you it is best to seek professional advice from qualified debt collectors.

Different Rules For Different States

Because the limitations period for debt recovery comes from state law, not national, there are also some slight – but very important – differences from state to state.

For instance In NSW, NT and the ACT, once the initial limitation period has expired, it cannot be restarted if the debtor acknowledges the debt or makes a payment. But in every other state this would reset the initial limitation period, allowing another 6 years for the creditor to start court proceedings.

Many states also have slightly different limitation periods. Here’s an overview of each state…

  • Australian Capital Territory — simple contract: 6 years. Court judgment: 12 years
  • New South Wales — Simple contract: 6 years. Court judgment: 12 years
  • Northern Territory — Simple contract: 3 years. Court judgment: 12 years
  • Queensland — Simple contract: 6 years. Court judgment: 12 years
  • South Australia — Simple contract: 6 years. Court judgment: 15 years
  • Tasmania — Simple contract: 6 years. Court judgment: 12 years
  • Victoria — Simple contract: 6 years. Court judgment: 15 years
  • Western Australia — Simple contract: 6 years. Court judgment: 12 years

So as you can see the topic of recovering old debts can become quite complex.

The best advice I can give is to always follow up outstanding debt immediately or hand them over to debt collectors if you don’t have the time or resources to do it yourself. Many debt collectors offer a No Recovery, No Fee service so you really have nothing to lose.

Ready to work with JMA?

If you would like professional advice for your specific situation I recommend you call JMA Credit Control on 1300 272 164 or contact us here, for free, no obligation advice on your current debts.

Written by Richard Thompson

Richard Thompson is the Managing Director and owner of JMA Credit Control and has over 25 years’ of trusted experience. Richard has a wealth of knowledge in Credit Management and Debt Recovery ensuring client’s recovery bad debt quickly and cost effectively.

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