By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.
When life gets busy, sometimes we put off important jobs to deal with more pressing matters. But when it comes to debt collection, this can only be put off for so long before debts become ‘statute barred‘. At this point the debts the subject of debt collection are no longer capable of being collected.
Most States and all Territories have time limits within which debt collection must be completed. In New South Wales, if too much time passes and the limitation period expires, section 63 of the Limitation Act 1969 (NSW) extinguishes the debt, meaning recovery of the debt is no longer possible..
In NSW, as in most states, the debt collection clock generally starts running from the date the cause of action first accrues. This is often the date of default; when the debtor fails to repay the debt, although there are some traps for the inexperienced in debt collection (for instance debts without a due date or which are ‘at call’). Once a default has arisen the creditor then has 6 years to commence the debt collection process formally, after which time the legislation restricts recovery, the debt becomes statute barred, and debt collection almost certainly impossible.