Owing money on debt that you can’t afford to pay can feel incredibly stressful. If your debt has gone to collections, you might wonder what happens if you don’t pay. While a collection agency can take you to court over unpaid debt, that has to happen within the timeframe set by the statute of limitations. Each province and territory sets its own limit, and it ranges from two to six years. If you have debt in collections, it is important to understand these limits so you can protect yourself.
Key Points
1. Creditors in Alberta, B.C., Saskatchewan, Manitoba, Ontario, New Brunswick, and Nova Scotia generally have 2 years to sue over unpaid consumer debt. Quebec allows 3 years, and P.E.I., Newfoundland and Labrador, and the territories allow 6.
2. A payment or written acknowledgment made before the deadline can restart the clock. This is one meaning of “re-aged” debt.
3. Once the period expires, the debt usually still exists and collectors can still contact you. But if they sue, you can defend yourself by pointing to the expired deadline.
4. Government debts, such as CRA tax debt and federal student loans, follow separate federal rules.
What Is The Statute Of Limitations For Debt In Canada?
The statute of limitations is a law that sets how long a creditor or collection agency can take legal action over an unpaid debt. If they sue after the deadline passes, you can raise the expired deadline as a defense, and the claim will normally be dismissed.
The length of the limitation period depends on a few main factors, including:
- Your province or territory. Each one sets its own limit, ranging from two to six years for most consumer debt.
- The type of debt you owe. Not all debt is subject to the statute of limitations.
- The time since your last acknowledgment. If you acknowledge the debt at any point, the limitation period restarts. You can acknowledge it by confirming in writing that it is yours, or by making a payment.
For context, debt is a reality for most households. Canadians carry an average of $22,377 in non-mortgage debt3, so knowing these rules matters to a lot of people.
When Does The Clock Start?
In most provinces, the clock starts when the creditor discovers they have a claim. For consumer debt, that is usually around the time you default, which is why it is often counted from your last payment.
The exact start date can be argued in court, so treat any date you calculate yourself as an estimate. If you have moved provinces since taking on the debt, which province’s limit applies can also get complicated, so get advice before relying on it.
Does The Statute Of Limitations Apply To All Types Of Debt?
The statute of limitations only applies to unsecured debt, such as an unsecured personal loan or a credit card. Some debts follow different rules, and the specifics can vary between provinces and territories:
- Student loans. If you owe on Canada Student Loans or Canada Apprentice Loans, there is a six-year limitation period that starts the day after your loan becomes effective2. A payment or acknowledgment can restart the clock, even after the period has expired, and the government can take the debt from your tax refund or other federal payments. Provincial student loan rules vary.
- Employment insurance (EI). If you receive an EI overpayment, the limitation period is also six years and starts the day of the overpayment1. The CRA advises against making payments on EI debt after that period ends.
- Tax debt. The limitation period for collecting tax debt is either six or ten years1. Like unsecured debt, acknowledging it by making a voluntary payment, or by writing to the CRA to propose a payment arrangement, can restart the clock.
- Secured debt. The statute of limitations does not apply the same way to secured debt, such as a mortgage or car loan. Because the debt is backed by an asset, the lender can foreclose or repossess rather than only sue.
- Court judgments. Once a creditor wins a lawsuit, the time they have to enforce the judgment is separate from the original limit, and usually much longer.
Statute Of Limitations On Debt By Province
Most of Canada now uses a 2-year limit for unpaid consumer debt, such as credit cards, personal loans, and utility bills. The table below also shows the ultimate limitation period, an absolute cutoff counted from the original event that applies even if the claim was not discovered.
| Province or territory | Limit on consumer debt | Ultimate limit | Legislation |
|---|---|---|---|
| Alberta | 2 years | 10 years | Limitations Act |
| British Columbia | 2 years | 15 years | Limitation Act |
| Saskatchewan | 2 years | 15 years | The Limitations Act |
| Manitoba | 2 years | 15 years | The Limitations Act (in force since September 30, 2022) |
| Ontario | 2 years | 15 years | Limitations Act, 2002 |
| Quebec | 3 years | Separate Civil Code system | Civil Code of Quebec |
| New Brunswick | 2 years | 15 years | Limitation of Actions Act |
| Nova Scotia | 2 years | 15 years | Limitation of Actions Act |
| Newfoundland and Labrador | 6 years | 30 years | Limitations Act |
| Prince Edward Island | 6 years | Category-based rules | Statute of Limitations |
| Yukon | 6 years | Category-based rules | Limitation of Actions Act |
| Northwest Territories | 6 years | Category-based rules | Limitation of Actions Act |
| Nunavut | 6 years | Category-based rules | Limitation of Actions Act |
- The basic limit (e.g., 2 years) starts when the creditor discovers, or reasonably should have discovered, that it has a claim.
- The ultimate limit (e.g., 15 years in Ontario) starts on the day the underlying event happened, such as the missed payment, whether or not anyone noticed.
Whichever deadline comes first wins. Say a creditor didn’t find out about a debt for years, perhaps through lost records. Normally, discovering it late would give them a fresh 2 years from that point. But once 15 years have passed since the original default, they can’t sue at all, even if they only just found out.
For ordinary consumer debt like credit cards, the ultimate limit rarely matters. Creditors know right away when you stop paying, so the basic limit runs out long before the ultimate one. It matters more for claims that surface late, like hidden defects or fraud.
What Is Re-Aged Debt?
Re-aged debt is used in two ways. One restarts the legal deadline to sue you, and the other makes an old debt look newer on your credit report.
Restarting The Limitation Period
A debt is re-aged legally when something restarts its limitation period. As mentioned above, this happens when you acknowledge that the debt is yours. There are a couple of common ways to do that:
- Making a payment. Even a small partial payment can count as acknowledging the debt.
- Agreeing to pay in writing. A signed letter, email, or agreement confirming the debt is yours can restart the clock. In Ontario, for example, an acknowledgment generally has to be in writing and signed, so a verbal promise on the phone is not enough on its own.
Generally, only a payment or acknowledgment made before the deadline restarts it. Some debts, like federal student loans, can be revived even after it has passed. Rules differ by province, so check before you pay or sign anything on an old debt.
Re-Aging On Your Credit Report
Re-aging also describes a collector reporting a newer date on a collection account, so it looks recent and stays on your credit report longer. Collections generally remain on your Equifax and TransUnion reports for about six years, counted from the original delinquency. If a collection account shows a date that does not match your records, dispute it directly with the credit bureau.
What Can Creditors Do Before The Limitation Period Ends?
Before the deadline, creditors and collectors can call and write to you, and they can take you to court. For example, if you fail to pay your water or gas bill, the utility company or a collector can sue you. If they win, they can use court tools such as garnishing your wages, freezing your bank account, or seizing your property to collect.
What they cannot do is have you jailed for unpaid consumer debt, since debt is a civil matter in Canada.
What Can Creditors Do After The Limitation Period Ends?
After the limitation period has run out, a creditor can no longer successfully sue you, as long as you raise the expired deadline as your defense. Outside Newfoundland and Labrador, the debt itself still exists, and collectors may keep contacting you. Even if a collector threatens legal action at this point, they cannot actually pursue it.
If you are sued anyway, do not ignore it. File a defense and point to the expired limitation period, because if you do not respond, the creditor may get a default judgment against you. And if you feel like a collector is harassing you or threatening a lawsuit they cannot bring, you can file a complaint with your province or territory’s consumer affairs office4.
Note: Don’t Restart The Clock By Accident
On an old debt that may be past its limitation period, making even a small payment or signing an acknowledgment can restart the clock and give the creditor a fresh window to sue. Before you pay or agree to anything on an old debt, confirm the dates and get advice.
Learn more: Can You Go To Jail For Not Paying A Personal Loan?
Does Debt Disappear After 7 Years In Canada?
No. The idea of a “7 year” rule mixes up two separate clocks, and neither one erases the debt.
| Clock | What It Controls | Typical Length |
|---|---|---|
| Limitation period | How long a creditor has to sue you | 2 to 6 years, depending on the province |
| Credit report retention | How long a collection shows on your report | About 6 years from the original delinquency |
Because they are separate, a debt can be too old to sue over but still appear on your credit report, or it can drop off your report while a creditor still has time to sue.
What To Do If A Collector Contacts You About An Old Debt
Don’t Agree To Anything On The Call
Ask for the details in writing: the original creditor, the amount, and the date of your last payment.
Check That The Collector Is Legitimate
Scammers pose as collectors and demand quick payment. See how to tell if your debt collector is a fraud.
Compare The Dates
Check the details against your own records and your credit report.
Find Your Province’s Limit
Use the table above to estimate whether your limitation period has already passed.
If The Deadline Has Not Passed
Talk to a non-profit credit counsellor about options such as a debt management plan or a consumer proposal.
If It Has Passed
You can choose not to pay. Avoid making a payment or signing an acknowledgment until you have gotten advice.
Learn more: Debt Relief In Canada
Should You Pay Your Debt Or Wait Out The Limitation Period?
If you can afford to pay your debt, you should consider doing so. While you can try to wait out the statute of limitations, there are several potential consequences:
- Legal action. Before the deadline passes, a creditor can take you to court, which can lead to expensive legal bills, wage garnishment, property seizure, and more debt.
- Credit damage. A collection account can lower your credit score for about six years, which makes borrowing harder and more expensive.
- Stress. Collectors can keep calling even after the deadline, which can feel very stressful.
If you can’t afford to pay, a credit counsellor or a licensed insolvency trustee can help you compare your options.
Bottom Line
If you have debt that has gone to collections and you can’t afford to pay, it can put you in a stressful situation. Phone calls from collectors can be intimidating, as can the threat of legal action. Understanding the statute of limitations in your province or territory helps you make a more informed decision about what to do next, and it helps you avoid accidentally giving up a defense. If you would like help navigating your debt, consider reaching out to a credit counsellor who can assess your situation and offer guidance on how to manage it.
Statute Of Limitations FAQs
Will my debt disappear after the limitation period?
Can a collector still call me after the limitation period?
Can I still be sued after the limitation period?
When does the limitation period start?
Is there a statute of limitations on CRA debt or student loans?
References
- Government of Canada, How long a debt can be collected by the CRA
- Justice Laws Website, Canada Student Loans Act, section 19.1
- CanLII, The Limitations Act (Manitoba), SM 2021, c 44
- Government of Canada, Federal, provincial and territorial consumer affairs offices
