What is the Statute of Limitations in BC?

A statute of limitations is a legal time limit for initiating lawsuits or civil claims. In British Columbia, the statute of limitations for most debt collection issues is two years. This means creditors have two years from the date of a missed payment or acknowledgment of the debt to take legal action. After this period, the debt remains but is no longer enforceable through the courts – although there are exceptions to this rule.

In this article, we’ll take a more detailed look at the limitation periods surrounding debt – including when limitation periods can be extended, what happens to statute-barred debt, and which debts have different limitation periods.

Understanding Debt Collection Limitations in BC

Many laws govern debt management in BC – but the British Columbia Limitations Act is one of the most significant. The Limitation Act sets guidelines for how long certain creditors (the people you owe money to) have to take legal action relating to the money that’s owed to them.

In 2013, the basic limitation period for most debts was reduced from six years to just two. These amendments aimed to modernize the law and bring it in line with the “model limitations statute” recommended by the Uniform Law Conference of Canada (ULCC).

The ULCC’s goal was to create consistency across provinces and territories, ensuring that limitation periods are reasonable and predictable across different areas of law. These amendments mean that most unsecured creditors must begin legal proceedings within two years of the last payment or the most recent acknowledgment of the debt.

While this two-year limitation period is commonly discussed in relation to debt, it’s only part of the story. To understand the limitation act properly, it’s important to understand which types of debt this two-year period applies to and how the clock begins ticking on those two years.

How is the 2-year Basic Limitation Period Measured?

The two-year limitation period for debt collection in British Columbia begins to run from either:

• The date of the last payment: If a debtor makes a payment, even a partial one, this action resets the clock on the two-year limitation period, starting again from the payment date.
• The date of acknowledgment: If the debtor acknowledges the debt in writing, such as through an email or letter confirming they owe the debt, this also resets the limitation period. The acknowledgment must be clear and in writing – but if it is, the clock will restart.

If no payment or acknowledgment occurs, the limitation period starts from the last date either action took place. After two years, the debt becomes statute-barred, meaning legal action to recover the debt is no longer possible.

Example

Here’s an example of how the two-year limitation period works:

Let’s say you have a credit card debt of $2,000. You stopped making payments on January 1, 2024. According to BC’s Limitations Act, the two-year limitation period begins from this date. If you make no further payments or acknowledge the debt in writing, the creditor has until January 1, 2026, to take legal action against you to recover the debt.

Let’s now say you make a small payment of $100 on June 1, 2024. This resets the clock on the limitation period, and the two-year countdown starts again from the payment date. The creditor now has until June 1, 2026, to take legal action to recover the remaining debt. If they don’t and the two year limit passes – the law considers the debt statute-barred.

What Does it Mean When a Debt Becomes Statute-Barred?

As mentioned above, when the two-year limitation period is reached, the debt becomes “statute-barred” – a legal term meaning that debt can no longer be enforced legally. This means the creditor cannot start a court proceeding or any other kind of legal action to try to recover the money owed.

Despite this, the debt still exists – even if it can’t be enforced by the courts. As such, creditors may still ask you to repay the debt – but they cannot force you to make payment through lawsuits, wage garnishment, or any other court-ordered proceedings.

Statute-Barred Debt and Your Credit Report

Since the debt still exists, it will still have an impact on your credit rating – even after the two-year period is up.

Typically, a debt will stay on your credit report for 6-7 years from the last payment date or last acknowledgment. When this 6-7-year period has passed, the debt should then be removed from your credit report and will no longer impact your ability to get credit.

What Kinds of Debts Does the 2-year Limitation Period Apply To?

The two-year limitation period in BC generally applies to unsecured debts, such as:

• Credit card debt
• Personal loans
• Unpaid bills (e.g., utilities, rent, phone bills)
• Lines of credit
• Medical bills (in some cases)

These are called ‘unsecured debts’ because no collateral is held by your creditor – meaning there’s no asset that can be taken back if you fail to pay.

Which Debts Aren’t Covered by the 2-Year Limitation Period?

While the Limitation Act applies to many unsecured debts, there are many debts to which it either doesn’t apply or to which different limitation periods are set.

These debts include:

Secured debts (e.g., mortgages or car loans)

These involve collateral, such as a home or car, which can still be seized or foreclosed upon. If you default on a mortgage, the lender can take legal action to foreclose or seize the collateral even after the two-year period.

Government debts

Many government debts, like income taxes and child support arrears, do not have a set limitation period. The government can pursue collection indefinitely.

In some cases (e.g., unpaid taxes), the Canada Revenue Agency (CRA) may have up to 10 years to pursue legal collection, but even after that, they can still take other measures like garnishing wages or seizing assets.

Student loans

Federally-backed student loans (Canada Student Loans) have a six-year limitation period for legal collection, starting from the date of default. However, this can reset if you make any payments or acknowledge the debt.

Private student loans may fall under the two-year limitation period unless otherwise specified.

Court-ordered debts

Once a debt has been turned into a court judgment, creditors generally have ten years to enforce the judgment in British Columbia. The creditor can apply to the courts to extend this period if necessary.

Basic Limitation Period vs Ultimate Limitation Period

If you explore the Limitation Act in more detail, you’ll see references to “basic” limitation periods and “ultimate” limitation periods. It’s useful to know a little about how these two terms compare and when they might relate to your debt.

The basic limitation period is usually the most relevant when it comes to debt. These are the limitations we’ve outlined above – a 2-year period after which most unsecured debt becomes statute barred.

That said, the ultimate limitation period can become relevant in some instances. For example, if a creditor does not discover your default (missed payments) immediately, they may be allowed to take action beyond the usual 2-year window. This ultimate limitation period stops this from happening indefinitely though – putting a maximum of 15-year period limitation on any legal action from when the debt was originally incurred, regardless of payments or acknowledgments.

This 15-year limit can also apply to secured debts – for example, if a mortgage lender seeks to recover a deficiency after foreclosing on a property, the 15-year limit would apply to any legal action to collect the remaining balance.

In some rare cases, the 15-year limit can apply to Government debts too. In the unlikely event that no action has been taken for 15 years, the ultimate limitation period may apply, stopping legal claims.

What Happens if a Creditor Continues to Chase a State-Barred Debt?

While creditors can’t legally enforce statute-barred debts through the courts, they may still attempt to recover these debts using other methods. This can include persistent phone calls, emails, or letters requesting payment. It’s important for debtors to understand their rights in these situations.

In British Columbia, debt collection practices are regulated by BC’s Business Practices and Consumer Protection Act (BPCPA). Under this law, debt collectors are prohibited from using harassment or aggressive tactics to recover statute-barred debts. They cannot threaten legal action, mislead you about the consequences of non-payment, or contact you at unreasonable times.

If a debt collector violates these rules, you can file a complaint with Consumer Protection BC, which regulates debt collection practices in the province. You also have the right to request that the debt collector stop contacting you. This can be done by sending a written request, after which they are only allowed to contact you in specific situations (e.g., to confirm they will cease collection efforts).

Understanding your rights can help protect you from undue stress, even if the debt remains on your credit report for a period of time.

Alternatives to Waiting for Debt to Become Statute-Barred

While waiting for a debt to become statute-barred may seem like an option, it can take two years or more, during which your credit score and financial situation can suffer. Instead of waiting, consider exploring other debt solutions that can offer more immediate relief and help you manage or reduce your debt.

Debt Consolidation

This involves combining multiple debts into a single loan with a lower interest rate. It simplifies payments and can reduce the overall cost of debt, helping you manage your finances more effectively without waiting for the debt to expire.

Credit Counselling

Working with a credit counselling agency may help you develop a debt management plan, where counsellors negotiate with your creditors to reduce interest rates and fees, helping you pay off your debt sooner.

Consumer Proposal

A Licensed Insolvency Trustee (LIT) can help you negotiate with your creditors to reduce the amount you owe and extend your repayment period. This option allows you to keep your assets and offers a formalized, legal solution that can eliminate your debt faster than waiting for it to become statute-barred.

The Statute of Limitations in BC: A Summary

For most unsecured debts, the statute of limitations means that after 2 years of non-payment or non-acknowledgment of debt, a debt becomes unenforceable by law. While this might sound like an attractive idea if you’re struggling with your finances, these 2 years can be extremely stressful – especially since the threat of legal action is potentially hanging over you the whole time.

Of course, the Limitation Act doesn’t apply to all debts – so even if you do manage to sit-it-out with some of the unsecured debt you have, this period doesn’t wipe your finances clean. If you’d prefer an option that gives you a fresh financial start, it’s a good idea to speak to debt professionals about solutions that are designed specifically for people in your situation.

Regardless of your situation, it’s important to understand how the Limitation Act applies to you – not least because it can protect you against lenders who rely on a lack of understanding to try to enforce debts that the law no longer recognizes.

Key Takeaways

• The statute of limitations in BC for most unsecured debts is two years, after which creditors can no longer take legal action to collect.
• The two-year period starts from the last payment or written acknowledgment of the debt and can be reset by any further payment or acknowledgment.
• Even if a debt becomes statute-barred, it can remain on your credit report for up to 6-7 years, impacting your credit score.
• Some debts, such as secured debts, government debts, and court-ordered debts, are not subject to the two-year limitation and may have different or no limits.
• Alternatives like debt consolidation, credit counselling, or a consumer proposal can provide relief before debts become statute-barred and help improve your financial situation sooner.