If a debt goes unpaid, you’ll face debt collectors and action from your lenders. This can cause quite a bit of stress, especially if you’re not sure what steps to take next. In a perfect world, no debt would ever go unpaid. Unfortunately, things happen, and sometimes debt piles up. However, like all legal matters, debt is subject to a statute of limitations. This means there is a limit to how long a debt can be chased in Australia.
So, how does this work, and when does it apply to you? There are strict rules debt collectors must follow, and it’s important to be educated so you can protect your wellbeing. Whether you’re being contacted by debt collectors or you’re struggling with unpaid debt, equip yourself with knowledge. In this guide, we’ll explore how long a debt can be chased in Australia.
Standard Limitation Periods for Debt Recovery
| Jurisdiction | Limitation Period | Relevant Legislation |
|---|---|---|
| New South Wales (NSW) | 6 years | Limitation Act 1969 (NSW) |
| Victoria | 6 years | Limitation of Actions Act 1958 (Vic) |
| Queensland | 6 years | Limitation of Actions Act 1974 (Qld) |
| South Australia | 6 years | Limitation of Actions Act 1936 (SA) |
| Western Australia | 6 years | Limitation Act 2005 (WA) |
| Tasmania | 6 years | Limitation Act 1974 (Tas) |
| Australian Capital Territory | 6 years | Limitation Act 1985 (ACT) |
| Northern Territory | 3 years | Limitation Act 1981 (NT) |
Source: austlii.edu.au
These periods typically commence from the date the debt became due, the last payment was made, or the debtor acknowledged the debt in writing.
What Is a Debt Collector?
First, what is a debt collector, and what role do they play in the debt process? Though many people confuse debt collectors with their lenders, these are actually different parties. A debt collector is any professional or agency who collects debts when they’re overdue. These can sometimes be a creditor, but they’re often a third-party agency.
Once your account falls behind, the debt collection process can begin. Debt collectors can do any of the following:
- Demand payment of money owed
- Make a repayment arrangement
- Find out why you’re unable to repay according to your plan
- Review your current payment plan
- Inspect or recover any mortgaged or collateral goods
The good news is there are limitations to the actions debt collectors can and can’t take. This is to prevent debt collectors and lenders from harassing debtors, keeping clear boundaries.
Debt collectors can contact you by phone, in-person, and by social media or email. That being said, there are limitations to the hours they can contact you as well as the frequency. You should never be harassed daily by debt collectors, and they need to keep your information confidential.
It’s important to keep all records associated with debt collectors who contact you. This includes saving any mail, voicemails, emails, and so on. Keep a log of the date, time, and point of contact to make sure they’re not overstepping their legal boundaries.
What Are Debt Collectors Not Allowed to Do?
If you notice debt collectors doing any of these things below, report their actions immediately. Debt collectors are held to standards under the Australian Consumer Law (ACL). This means they cannot do any of the following:
- Use physical force
- Harass you unreasonably
- Provide any false or misleading statements
- Trespass on property
- Verbally abuse you
- Take advantage of any disability
- Threaten legal action they don’t intend to pursue
- Falsify court documents
This doesn’t just apply to you. While debt collectors are allowed to contact family members, they cannot harass them either. During all contact with family, debt collectors cannot reveal any information about your financial situation. This is all confidential and protected.
The best way to deal with debt collectors is to be cooperative and to make sure they’re being respectful. Be honest and upfront about your debt and ability to pay. If you’re not sure what to do next, contact a financial expert like the team at Debt Busters. A professional agency can represent you in these matters, taking over all negotiations with debt collectors so you no longer have to worry about them contacting you.
What Is the Time Limit for Debt?
It’s also important to recognise that there is a time limit to collecting this debt. This is why many debt collectors take action quickly, and they express a sense of urgency. In their case, they’re working under a strict timeline.
After that period passes, your lender and debt collectors can no longer pursue debt recovery through legal channels. What is the time limit for chasing most debts in Australia?
It depends on your location as well as the type of debt. While you should talk to a debt professional for specific advice, we can look at the timeline for simple contract debt.
In most of Australia, a debt can be chased for up to 6 years. The exception is the Northern Territory, where the time limit is only 3 years.
Does this mean the debt is completely gone after 3-6 years? In short, the answer is no. This deadline isn’t for collecting the debt. It’s for filing a relevant claim with the right court. The debt can be chased starting from when:
- The debt became due
- The date of the last payment made
- The date the debtor acknowledged they owed the debt (in writing)
In some cases, creditors may also try to claim interest or fees that have accrued during that time, especially if the debt terms allow for it, though this must still fall within the legal time limit
What happens after this 3-6 year period? A creditor will no longer have the legal right to continue pursuing the debt. The exception to this is if the debtor acknowledges the debt to writing at a later date. (This can be as simple as asking for a repayment arrangement or account statement for ‘your’ debt). If this happens, the clock resets on the statute of limitations.
If you’re unsure whether the limitation period has passed, it’s wise to seek legal advice before responding to any collection notice.
Can Creditors Still Collect These Debts?
After the 3-6 year limitation period passes, can the creditor still collect these debts from debtors? The lender or collection agency can still attempt to negotiate with the debtor, but they don’t have much to work with. They are not legally able to bring any legal action against the debtor, so these actions usually fall flat.
The lender is unable to deceive the debtor by implying that these debts are still legally owed. While the debtor might repay them in good faith, there is no longer any legal action they can face. These debts can no longer be collected, but that doesn’t mean there won’t be any further consequences for the debtor. This debt is still reported to credit agencies, and it has a large impact on their credit rating.
When Do You Have to Pay an Old Debt?
If you have an old debt, do you still have to pay it? First, you need to determine if a debt is statute-barred. This is a legal term that means the statute of limitations has passed on this particular debt, and no more court action can be taken against you. If 6 years (or 3 in the Northern Territory) have passed and all of the following are true, then it’s likely this debt is statute-barred.
- You haven’t made a payment.
- You haven’t acknowledged the debt in writing (email, mail, etc).
- No court judgment was made against you.
However, note that there are different rules for home property, like a mortgage. Action can still be taken on a mortgage. This only applies for general unsecured debt, like credit card debt.
You can check if there’s a court judgment against you in a few different ways:
- Contact your local court or magistrates’ court
- Ask for details of any court order from your debt collector
- Get a copy of your credit report
If you’re contacted by a debt collector for an old debt, consider the timeline. If you believe this is a statute-barred debt, don’t make a payment or agree to pay the alleged debt.
Collect all records from the court (if any), and keep a log of times the debt collector contacts you. If you’re in this situation, it’s important to seek assistance from an expert. You can contact the National Debt Hotline or the dedicated financial consultants at Debt Busters.
In the case that there is a court judgment against you, you still have options. For example, this judgment might be set aside in special circumstances. You can also file your own appeal. However, in some cases, the court might be able to enforce this debt through wage garnishment, property seizing, and more. If you’re facing legal action, it’s time to get professional advice.
At any time, if you find a debt collector’s behaviour unacceptable, contact the police immediately. They should never harass or intimidate you.
In Australia, the primary external dispute resolution scheme (EDR) for financial services is the Australian Financial Complaints Authority (AFCA).
You have protected rights, and you can contact AFCA to make a complaint. Nobody should ever be made to feel unsafe over debts.
What Happens If You Owe the Debt?
In the case that you owe the debt and the 3-6 years have yet to pass, you still have options. Many Australians struggle to repay their debts every year, and there are a number of solutions available to ease this burden. Debt collectors, though they can be intimidating, simply want to get paid. Many are willing to work with you on a repayment plan as long as you show good faith.
To begin, consider how much you can afford to pay based on your current budget. Talk to your debt collector about your specific situation, and ask if any financial hardship programs are available. In most cases, you can pay back smaller amounts over a longer time, settle the debt for a smaller sum, or even waive the debt in some situations.
Ultimately, you don’t have to take action alone. At Debt Busters, our debt professionals are skilled at negotiating with debt collectors on your behalf. Our team talks to debt collectors and lenders on your behalf, saving your peace of mind. Contact a member of our team today on 1300 68 322 to talk about your options. We’re here for you.