September 5, 2017

What it means for a debt to be statute barred and how that affects you.

Under Section 4 of the Limitations Act RSO a debt becomes statute barred two years after it was discovered.

“Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.  2002, c. 24, Sched. B, s. 4.


5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).  2002, c. 24, Sched. B, s. 5 (1).”

To simplify what that means for most consumers your creditors have two years starting from the date on which they realised you were in arrears of payment (or had defaulted on the terms of your payment arrangements) to take legal action.  If they fail to resort to a legal mechanism, such as a lawsuit, for the collection of that debt within that time frame, with very few exceptions, they are prohibited from doing so.

In other words, although you may continue to owe the debt after the two years has expired, the creditor cannot sue you nor garnishee your wages.  They can continue to try to collect the debt by calling you and demanding payment but will be unable to follow through with court action.

Non-statutory means may also be utilized for the collection of debts that are outside of the two-year Limitation Period such as the right of offset or set-off.  This may occur if you owed money to a bank and failed to make payments for a number of years, barring the debt from statutory action, and then you deposited funds with the bank the bank could then exercise a right of offset and seize the funds voluntarily deposited in their accounts.