- Do I have to pay an old debt?
- 31/12/2015 Make a Comment
- Contributed by: Bewitched ( 4 articles in 2015 )
Blow away old debt
Key Messages:
a) There are time limits for taking legal action. This means that your debts may become too old for a creditor to successfully take legal action against you.
b) Get advice before making payment or acknowledging an old debt – in some circumstances these actions may start the limitation period all over again and your debt will no longer be statute barred.
A debt may be statute barred (too old to pursue) because the Limitations of Actions Act 1958 (Vic) places a limit on the time a creditor has to take legal action to recover a debt.
There are a number of reasons for having a time limit on a creditor taking legal action, including:
If a creditor starts court action against you, and the debt is statute barred, you will have a complete defence to the action.
If you tell a creditor that you believe a debt is statute barred, the creditor will be unlikely to start any court action against you.
The Privacy (Credit Reporting) Code 2014 a credit reporting body must, upon request, remove default information that relates to a statute-barred debt.[ii]
6 YEAR LIMITATION PERIOD
For most debts, a creditor must begin court action to recover the debt within 6 years of the date:
The limitation period starts from the latest event in the above list.[iii]
15 YEAR LIMITATION PERIOD
The creditor has more than 6 years to collect the debt including if:
a court judgment has been entered, in which case a 15 year limitation period applies for new actions (such as some bankruptcy proceedings);[iv]
the debt relates to a mortgage over property in which case a 15 year limitation period applies. [v]
These are complex issues and getting advice is recommended.
REQUESTING PROOF
Unless you are sure an old debt is not statute barred:
You should request details of the alleged debt and seek advice immediately.
Refer to our sample letter: Asking for proof below.
Once you have received the information from creditor, get advice from one of the listed contacts to make sure you know your rights.
TAKING ACTION
If you believe that an old debt is statute barred get advice and then send a letter to the creditor telling them this. Refer to our sample letter below: Alleging a debt is statute barred
Refer to our factsheet I’m being hassled by a debt collector for what to do if you are being hassled by a debt collector.
IF YOU HAVE PAID OR ACKNOWLEDGED AN OLD DEBT
If a creditor represents that legal action will or may be taken when a defence at law applies, this may be misleading and deceptive or unconscionable if the debtor has not had the opportunity to obtain legal advice.
Seek legal advice to find out whether you can argue that because the conduct of the creditor you should still have the benefit of the debt being statute barred.
Collection House v Taylor [vi]
Taylor was contacted about a 10 year old debt by a debt collector acting on behalf Collection House. The debt collector said that if payment was not made legal action may be an option. Taylor didn’t know that the debt was statute barred.
Taylor agreed she would pay $4,500 on her credit card immediately, and that she would arrange a $500 increase in her credit card limit in order to pay the balance.
Taylor took legal action to get her money back. The Supreme Court found that Collection House had engaged in unconscionable conduct.
IF THE CREDITOR TAKES LEGAL ACTION
If the creditor takes legal action, get legal advice immediately: see Further Information below. Short time limits apply to take action.
It is up to you to raise the defence that the debt is statute barred if you think it applies. If you do nothing, the creditor might get a court judgment (that you must repay the debt).
The creditor will then have up to 15 years – or possibly more – to enforce the judgment.
In cases where the debt arises out of a credit contract, a complaint to the Financial Ombudsman Service or the Credit and Investments Ombudsman before judgement is entered will have the effect of stopping actual or threatened legal action in relation to credit debts.
If you do nothing, a court judgment will be entered against you.
Sample Letters
An example of a letter requesting proof that a debt is owed.
An example of a letter alleging a debt is statute barred.
[i] Brisbane South Regional Health Authority v Taylor 186 CLR 541 [1996]
[ii] paragraph 20.6, Privacy (Credit Reporting) Code 2014 (Version 1.2)
[iii] Limitation of Action Act 1958 (Vic) s 5(1) and 24 – 26
[iv] Limitation of Action Act 1958 (Vic) s 5(4), see Dennehy v Reasonable Endeavours Pty Ltd [2003] FCAFC 158
[v] Limitation of Action Act 1958 (Vic) s 20
[vi] Collection House Limited v Taylor [2004] VSC 49 (3 March 2004)
Further information
Consumer Action Law Centre
Telephone: (03) 9629 6300,
or 1800 466 477 for country callers.
Email: advice@consumeraction.org.au
Financial Ombudsman Service
Tel: 1300 78 08 08
https://fos.org.au/centric/home_page.jsp
Credit Ombudsman Service
Tel: 1800 138 422
www.cosl.com.au
Moneyhelp
Telephone: 1800 149 689
www.moneyhelp.org.au
Warning: This fact sheet is for information only and should not be relied upon as legal advice. This information applies only in Victoria and was updated on 31 December 2015.
+++++++++++++++++++
Also
HOW DO I WORK OUT IF I HAVE A LIMITATION ACT DEFENCE?
You should write a letter to the creditor or debt collector immediately:
● Requesting copies of all relevant account statements. For example, if you remember making the last repayment over 6 years ago, account statements should be requested from before that date until the present;
● Requesting copies of all demand letters;
● Requesting details of any Court Judgments;
● The letter should state that the alleged debt is disputed on the basis it is statute barred under the Limitation Act (NSW)
● Be very careful not to acknowledge the alleged debt in the letter;
● Make sure you use the term “alleged debt” to avoid acknowledgment;
● The letter should request a stay of all legal action for 28 days after the requested information is provided.
a) There are time limits for taking legal action. This means that your debts may become too old for a creditor to successfully take legal action against you.
b) Get advice before making payment or acknowledging an old debt – in some circumstances these actions may start the limitation period all over again and your debt will no longer be statute barred.
A debt may be statute barred (too old to pursue) because the Limitations of Actions Act 1958 (Vic) places a limit on the time a creditor has to take legal action to recover a debt.
There are a number of reasons for having a time limit on a creditor taking legal action, including:
- as time goes by, relevant evidence is likely to be lost;
- it is oppressive, even “cruel”, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed.[i]
If a creditor starts court action against you, and the debt is statute barred, you will have a complete defence to the action.
If you tell a creditor that you believe a debt is statute barred, the creditor will be unlikely to start any court action against you.
The Privacy (Credit Reporting) Code 2014 a credit reporting body must, upon request, remove default information that relates to a statute-barred debt.[ii]
6 YEAR LIMITATION PERIOD
For most debts, a creditor must begin court action to recover the debt within 6 years of the date:
- that you last made a payment; or
- that you admitted in writing that you owed the debt.
The limitation period starts from the latest event in the above list.[iii]
15 YEAR LIMITATION PERIOD
The creditor has more than 6 years to collect the debt including if:
a court judgment has been entered, in which case a 15 year limitation period applies for new actions (such as some bankruptcy proceedings);[iv]
the debt relates to a mortgage over property in which case a 15 year limitation period applies. [v]
These are complex issues and getting advice is recommended.
REQUESTING PROOF
Unless you are sure an old debt is not statute barred:
- do not admit that you owe the debt;
- do not make a payment;
- do not accept a creditor’s word that you owe the debt.
You should request details of the alleged debt and seek advice immediately.
Refer to our sample letter: Asking for proof below.
Once you have received the information from creditor, get advice from one of the listed contacts to make sure you know your rights.
TAKING ACTION
If you believe that an old debt is statute barred get advice and then send a letter to the creditor telling them this. Refer to our sample letter below: Alleging a debt is statute barred
Refer to our factsheet I’m being hassled by a debt collector for what to do if you are being hassled by a debt collector.
IF YOU HAVE PAID OR ACKNOWLEDGED AN OLD DEBT
If a creditor represents that legal action will or may be taken when a defence at law applies, this may be misleading and deceptive or unconscionable if the debtor has not had the opportunity to obtain legal advice.
Seek legal advice to find out whether you can argue that because the conduct of the creditor you should still have the benefit of the debt being statute barred.
Collection House v Taylor [vi]
Taylor was contacted about a 10 year old debt by a debt collector acting on behalf Collection House. The debt collector said that if payment was not made legal action may be an option. Taylor didn’t know that the debt was statute barred.
Taylor agreed she would pay $4,500 on her credit card immediately, and that she would arrange a $500 increase in her credit card limit in order to pay the balance.
Taylor took legal action to get her money back. The Supreme Court found that Collection House had engaged in unconscionable conduct.
IF THE CREDITOR TAKES LEGAL ACTION
If the creditor takes legal action, get legal advice immediately: see Further Information below. Short time limits apply to take action.
It is up to you to raise the defence that the debt is statute barred if you think it applies. If you do nothing, the creditor might get a court judgment (that you must repay the debt).
The creditor will then have up to 15 years – or possibly more – to enforce the judgment.
In cases where the debt arises out of a credit contract, a complaint to the Financial Ombudsman Service or the Credit and Investments Ombudsman before judgement is entered will have the effect of stopping actual or threatened legal action in relation to credit debts.
If you do nothing, a court judgment will be entered against you.
Sample Letters
An example of a letter requesting proof that a debt is owed.
An example of a letter alleging a debt is statute barred.
[i] Brisbane South Regional Health Authority v Taylor 186 CLR 541 [1996]
[ii] paragraph 20.6, Privacy (Credit Reporting) Code 2014 (Version 1.2)
[iii] Limitation of Action Act 1958 (Vic) s 5(1) and 24 – 26
[iv] Limitation of Action Act 1958 (Vic) s 5(4), see Dennehy v Reasonable Endeavours Pty Ltd [2003] FCAFC 158
[v] Limitation of Action Act 1958 (Vic) s 20
[vi] Collection House Limited v Taylor [2004] VSC 49 (3 March 2004)
Further information
Consumer Action Law Centre
Telephone: (03) 9629 6300,
or 1800 466 477 for country callers.
Email: advice@consumeraction.org.au
Financial Ombudsman Service
Tel: 1300 78 08 08
https://fos.org.au/centric/home_page.jsp
Credit Ombudsman Service
Tel: 1800 138 422
www.cosl.com.au
Moneyhelp
Telephone: 1800 149 689
www.moneyhelp.org.au
Warning: This fact sheet is for information only and should not be relied upon as legal advice. This information applies only in Victoria and was updated on 31 December 2015.
+++++++++++++++++++
Also
HOW DO I WORK OUT IF I HAVE A LIMITATION ACT DEFENCE?
You should write a letter to the creditor or debt collector immediately:
● Requesting copies of all relevant account statements. For example, if you remember making the last repayment over 6 years ago, account statements should be requested from before that date until the present;
● Requesting copies of all demand letters;
● Requesting details of any Court Judgments;
● The letter should state that the alleged debt is disputed on the basis it is statute barred under the Limitation Act (NSW)
● Be very careful not to acknowledge the alleged debt in the letter;
● Make sure you use the term “alleged debt” to avoid acknowledgment;
● The letter should request a stay of all legal action for 28 days after the requested information is provided.
Source: https://consumeraction.org.au/debt-collection-old-debts/
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