Statute of Limitations
I bet it sounds familiar. You may have heard this term used on a television show or read it in a news story. Usually it will refer to how long after a criminal act can someone be prosecuted. A Statute is a law (usually) passed by State or Provincial legislature setting a time limit on how long after an act was committed can legal action still be taken.
Very interesting but what does this have to do with what we have been talking about : debt collection, account receivables or collecting on an outstanding loan? I mean….
If I am owed money I have a right to sue on it and collect it and anytime I like right ?
Alas no, this is wrong.
I never cease to be amazed at how many folks in business and even in the professions are unaware of the Statute Of Limitations or, for reasons that continue to mystify me, simply ignore it.
I was recently contacted by a company that is owed $US 50,000.00 since 2015 and they had done nothing to collect except to keep sending email requests and statements. I see this all the time
You do not have forever to collect on monies owed you. So if you are being nice and patient with your debtor it is very commendable. Just be aware that if you wait too long you may lose the chance to collect forever.
The Statute of Limitations used to be 6 years. That was reduced in Ontario and in most of Canada’s other provinces to two years.
This two year period will start running from the time you knew or should have known that you were owed money or knew you suffered damages. Depending on individual circumstances there are different ways of calculating this period but once it is passed, pleading the Statute of Limitations is an absolute defence and you are then barred from collecting what is owed to you, regardless of how just your claim is.
The way to “reset the clock”
One sure way to extend the limitation period, is to get a promise of payment from the debtor in writing. In the alternative, get a partial payment on account, this will keep your claim options alive. But be aware that it will do little to increase the probability that you will get paid. The only way to do that is to act as soon as you know your client’s or customer’s account is delinquent.