What is a Statute Barred Debt

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What is a Statute Barred Debt?

These are debts that have to reach the statutory limitation period.  This means that the debt has reached an age where it is no longer legal to pursue. 

Each state of Australia has a period of time where a debt can be pursued, and has legislation in place that outlines what happens when the limitation period has expired.

Limitation period for simple contract:

Limitation periods for unsecured personal loans and credit cards and the majority of debts sold or referred to a collection agency will arise from simple contracts.  In all states the limitation period for this type of debt is 6 years, except the Northern Territory where it is 3 years.

Limitation period for court judgment:

These are debts following a court judgment

All states are 12 years except South Australia and Victoria where it is 15 years.

The limitation period start date:

This usually starts at the time the debt is entered into.  However it is not always that straight forward.  If a payment arrangement is entered into or the debtor acknowledges the debt in writing the period of limitation recommences at this time.

There is a section in the ASIC / ACCC Debt Collection Guidelines around collecting on statute barred debts, I encourage all businesses that have an older debtors ledger to ensure that you are not following up on these types of debt and to have a good read of the guidelines.

Please find a copy of this document below.

More in this category: Big Changes to Credit Reporting »

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