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Is there a statute of limitations on credit card debt?

Credit card debt can be a difficult cycle. Interest rates add up. Missed payments. Calls from collectors and creditors. Threats of legal action. Know the law and your options. Educating yourself is the first step to managing credit card debt. In this article, we explore Canadian statutes of limitations.

What is a statute of limitations?

A statute of limitations is the amount of time a creditor can pursue legal action for debts. It is the timeframe creditors can take someone to court for a debt.

Creditors will still collect on debts after their statute of limitations has expired. Meaning you will get phone calls. It will affect your credit score. You are still responsible for the repayment of credit card debts. Yet creditors cannot take you to court for the debts once the statute of limitations has passed.

Do you have a problem with outstanding credit card debt? Get some sound advice from a trained counsellor.

What is the statute of limitations on credit card debt in Canada?

In Canada, the statute of limitations is six years. The six-year statute of limitations resets anytime you make a payment, or acknowledgement of debt. Different provinces and territories have different statutes of limitations. Below are the provincial and federal statutes of limitations:

Alberta → 2 to 10 years
British Columbia → 2 years
Manitoba → 6 years
New Brunswick → 6 years
Newfoundland and Labrador → 6 years
Nova Scotia → 2 years
Northwest Territories → 6 years
Ontario → 2 to 6 years
Prince Edward Island → 6 years
Quebec → 3 years
Saskatchewan → 2 years
Yukon → 6 years
All Canada (federal) → 6 years

Should you pay unpaid credit card debts?

Even with a statute of limitations for legal actions on credit card debts, you must pay debts. Collectors and creditors will attempt to get payment. They will report your debts to credit bureaus which will affect your credit score. This creates poor credit history. Credit, like a car loan or mortgage, will be difficult to secure. Resolving debts can improve your credit score. And rebuild your credit.

What can you do?

Debt can become overwhelming. Calls from collectors can be tiresome and hard to handle. Managing and paying off debt can help with financial related anxieties. It will solve increasing interest costs. The good news is you have options.

Read Debt Settlement vs. Consumer Proposal for in-depth information.

Monthly Payment

How much debt do you have? Have you sat down and added it all up? Is it small and manageable? A scheduled monthly payment may be your best option to help improve your credit score and pay off debt.

Do not let large debt leave you in a cycle of increasing interest fees and dodging collection calls. There are other options to begin the credit recovery and payments process.

Credit Counselling

Credit counselling is a good first step to avoid bankruptcy. Counsellors will do everything they can to help the situation. Meeting with a counsellor will bring relief and give you realistic options.

Credit counselling is for people with overwhelming debts. Counselling sessions will organize your debt, income and expenses. Counsellors consider debt consolidation, debt settlement and debt management among other tactics. They help you create a realistic and manageable budget. You repay your debt using a monthly payment.

Counsellors will communicate with your creditors to freeze or reduce interest. You will pay your debt down in a manageable way. Credit counsellors will speak to collectors and creditors on your behalf. Collection calls will stop haunting you. You can refer collectors to your credit counsellor if they happen to reach you.

Consumer Proposal

A consumer proposal will be the next step to consider for large unmanageable debts. A licensed insolvency trustee will work with you and your creditors. Creating a debt settlement arrangement. Where you will agree to pay back a lesser amount than you owe.

A licensed insolvency trustee creates a proposal your creditors will likely accept. Thereby saving you money on repayment and extending the time of repayment. 

File for Bankruptcy

In Canada, the bankruptcy process is your last resort. It is what they call a chapter 7 bankruptcy in the United States. Some debt loads make it a required choice. In these cases, someone declares bankruptcy because it is the best solution. Like a consumer proposal, you will work with a licensed insolvency trustee.

You will receive debt forgiveness in exchange for your assets. Depending on where you live in Canada, some assets may fall into exceptions and will be safe. The best benefit of bankruptcy is that any legal action taken against you by creditors stops.

No more phone calls. The bankruptcy process settles quicker than consumer proposals. Discharge from bankruptcy can occur in as little as nine months.

The office of the superintendent of bankruptcy administers the Bankruptcy and Insolvency Act (BIA). A bankruptcy trustee must file and discharge from bankruptcy. There are three types of bankruptcy in Canada. Personal bankruptcy, small business, and corporate bankruptcy.

The most common type of bankruptcy is personal bankruptcy. A bankruptcy trustee will be able to administer any of these types of bankruptcies.

Act Now

There is a statute of limitations for legal action on credit card debt. Debt stays with you. It will affect your credit score as creditors will report to credit bureaus for years. Act and consider your options. Seek out a credit counsellor or licensed insolvency trustee with us today. Begin the process that will find the best solutions for overwhelming debt.

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