What is the Statute of Limitations and what does it mean for outstanding debt
When it comes to debt recovery, it is important to know that outstanding debts are subject to a statute of limitations.
If a creditor fails to take action before the statute of limitations expires, the debt becomes statute-barred and there is no longer a legal obligation for the debtor to pay it back.
As a result of the Statute of Limitations, it is critical that businesses follow up on debts as soon as possible to avoid financial trouble as a result of not being able to recover them.
What is the Australian statute of limitation for debts?
The statute of limitation for a debt varies depending on the type of debt as well as the jurisdiction it falls under. Given the wide possibilities, we have focused this article to Victoria and simple contract debts that are most commonly found in business relations.
For a simple contract debt, the statute of limitation is 6 years. It is not a deadline for collecting the debt, but rather a deadline for filing any claims or pursuing legal action in relation to that debt.
It is important to note that a debt isn’t always written off after 6 years as court judgments also impact the statute of limitations. For example, if a court judgment falls in your favour, the statute of limitation is 15 years in Victoria.
What happens when my debt is statute barred?
Once the limitation period expires, a creditor can no longer take legal action to recover the debt as a result of it becoming statute barred.
When does the statute of limitation period start?
The starting date of the limitation period in Victoria varies depending on several factors such as the type of debt and the terms of contract. In most situations, the limitation period starts when the debtor fails to meet the payment terms of the agreement.
In some situations, the limitation period can be reset such as in cases where the debtor makes a written acknowledgement of the debt or a payment for it. Once the limitation period resets, you will be entitled to the full limitation period from the time of last payment or acknowledgement of the debt.
Can I collect debts that are statute barred?
Once a debt is statute barred in Victoria, you will no longer be able to seek legal recourse nor deceive the debtor on the pretext that they are legally obliged to make payment. You will still, however, be able to ask for it and take measures to recover it through ordinary means. It should be noted that the chances of recovery of a statute barred debt is low, as you will be trying on that person paying their debt as a result of their personal moral obligation.
How to recover debt efficiently and cost-effectively
Having a reliable debt recovery process is critical for all businesses no matter the size. The impact of debts on a businesses’ cash flow can be harmful to its operations, which is why efficient and cost-effective debt recovery is necessary.
Utilising modern technology such as online debt recovery platforms like DebtForce enable business owners to focus on their business while being kept informed about the debt recovery process affecting the business. With full transparency and a real time tracking status on all debts, DebtForce makes it easy for business owners to make necessary critical decisions relating to debts and debtors.
Learn how DebtForce can help your business recover its debts efficiently and cost-effectively today.