For many businesses, it can often come as a surprise when they discover that any unpaid accounts have to be recovered within a certain time period. By choosing not to follow up on an unpaid invoice in a timely manner, there is a risk of forfeiting the payment altogether. This is because there is a statute of limitations which defines the time limit that you can take legal action to collect a debt. On the flip side, for someone who is in debt and unable to pay it off, once this statute of limitations has expired, no legal action can be taken against them to recover the money owed. So what is the statute of limitations? And how does it work in Australia?.
What Is The Statute Of Limitations?
Each State and Territory in Australia has its own Limitation Act. This defines the period in which a creditor can bring an action for recovery of their debts. The period can vary depending on the type of debt and the Australian jurisdiction. If we take a look at contract debt, which is the most common form, we can examine this further.
What is the statute of limitations on contract debt? Across Australia, it is 6 years, with the exception of the Northern Territory, which is 3 years. This doesn’t mean the debt has to be collected within this timeframe. Instead, it is the deadline for filing the court claims.
When Does The Statute Of Limitations Start?
Are you unsure whether a debt you either owe or are owed falls under the statute of limitations? The first thing you need to consider is when this period actually begins. To put it simply, the date starts when the creditor has the legal right to take action against the person or business in debt. Once again, this is determined on many differing factors. These factors include: the type of debt, the jurisdiction and the terms of the contract. In most of the cases, the period begins when the contract has been broken and the debtor has failed to meet the terms of their agreement.
Can The Period Be Extended?
In a perfect world, the debt is paid off in time and the contract is honoured. However, this just isn’t always the case. If the creditor isn’t keeping on top of their finances, it can be easy for this slip under the radar. This begs the questions, can the statute of limitations be extended?
It can be reset in certain circumstances. For example, if the debtor makes a payment, or enters into an amended agreement based on their failure to pay then the period starts again. This gives the creditor the full period to take legal action. And yes, in other situations it can begin again after the initial period, but this is dependent on the circumstances.
How Do I Chase Up An Old Debt?
If you are the creditor, then your best option is to hire a debt recovery specialist to help you follow up with old debt. They are skilled at carrying out this process and will be able to assess your individual situation and determine the best move.
Do I Have To Pay An Old Debt?
If you are the debtor, you may be wondering if this debt even has to be paid after some years have passed. Being within the six-year period means that your creditor may choose to take legal action. If you are out of this period, then the debt is statute-barred, which means it can no longer be pursued. This debt will then be removed from your credit report.
Of course, in some situations, you may not be sure where you stand. In this case, there are a few steps you can follow. Firstly, never admit to owing the debt and avoid making the payment until you can work it out. Don’t just accept the creditor’s word that you owe them. Instead, request all the details of the alleged debt and make sure you have all the facts before commenting.
Where To Find Help
If you find yourself in the position of being pursued for an old debt, get the right help. The team at Clean Credit can offer expert advice around the statute of limitations. We can help to clear up whether they apply in your circumstances. This involves getting the right information. It is always important to know where you stand before you tackle the issue at hand, to give you the best outcome. As a creditor, you should also seek legal help when it comes to pursuing an old debt. Ensure to take the best action before the statute of limitations is up.