Have you ever wondered how long a creditor can legally pursue a debt in Ontario? Many people assume that unpaid debts stay collectible indefinitely, but that is not the case.
Ontario has a statute of limitations on debt, which dictates the time frame within which creditors can take legal action to recover unpaid amounts.
In this article, we will explore the statute of limitations on debt in Ontario in 2025, covering essential topics like how long debts remain collectible, what happens when a debt becomes statute-barred, how the limitation period can be reset, and how it impacts credit reports.
We will also discuss the rights of debtors and collection agency regulations, helping you navigate the often-confusing world of debt collection laws.
Understanding the Ontario Limitations Act and Debt Collection
The Ontario Limitations Act is the legal framework that establishes time limits for creditors to take legal action against debtors. The act serves two main purposes:
- It provides debtors with legal protection against indefinite lawsuits.
- It encourages creditors to take timely action if they intend to recover debts through legal means.
Key Points About the Ontario Limitations Act
- The basic limitation period for debt collection in Ontario is two years from the date of the last payment or written acknowledgment of the debt.
- If a creditor fails to initiate legal action within this two-year period, they lose the right to sue the debtor in court.
- The statute of limitations does not erase the debt. The debt remains valid, but the creditor cannot enforce it through the legal system.
Why Does the Statute of Limitations Exist?
The statute of limitations protects individuals from being sued over old debts where evidence and financial records may no longer be reliable.
It also ensures that creditors take responsibility for actively pursuing unpaid debts within a reasonable timeframe.
What Is the Time Limit for Debt Collection in Ontario?
The standard limitation period for debt collection in Ontario is two years. This means that if a debtor stops making payments, a creditor has two years from the date of the last payment to file a lawsuit.
How Does the Two-Year Period Work?
- If a debtor made their last payment on March 1, 2023, the creditor has until March 1, 2025, to take legal action.
- If no legal action is taken within that period, the debt becomes statute-barred and the debtor cannot be sued in court.
Does This Time Limit Apply to All Creditors?
The two-year limitation applies to most types of debts, including:
- Credit card balances
- Personal loans
- Lines of credit
- Utility bills
- Unpaid rent
However, some debts, such as government-issued debts, may have different rules, which we will explore later in the article.
What Happens When a Debt Becomes Statute-Barred?
A statute-barred debt is a debt that has exceeded the legal limitation period for court action. Once a debt is statute-barred:
- The creditor loses the legal right to sue the debtor.
- Collection agencies may still contact the debtor but cannot threaten legal action.
- The debt does not disappear and may still impact the debtor’s credit report.
Can Creditors Still Contact You for a Statute-Barred Debt?
Yes, collection agencies can still request payment, but they cannot sue or take legal action. However, if a debtor believes that they are being harassed over an old debt, they can file a complaint with the Ontario Ministry of Public and Business Service Delivery.
Does a Statute-Barred Debt Affect Your Credit Report?
Even if a debt is past the statute of limitations for legal action, it can still appear on your credit report for up to six years from the last payment date.
How Can a Limitation Period Be Reset?
A limitation period can be reset under certain conditions, allowing creditors to sue again.
Actions That Restart the Limitation Period
The two-year period resets if a debtor:
- Makes a partial payment towards the debt.
- Acknowledges the debt in writing, such as through an email or signed document.
Why Is This Important?
Many debtors unknowingly restart the limitation period by responding to collection agencies, making small payments, or admitting they owe the debt. This resets the clock and allows creditors to take legal action again.
Does the Statute of Limitations Apply to All Types of Debt?
The two-year limitation applies to most unsecured debts, but some debts follow different rules.
Types of Debt Covered by the Two-Year Limitation
- Credit card debt
- Personal loans
- Medical bills
- Utility bills
Debts That May Have Different Rules
- Government debts (e.g., student loans, taxes, child support) do not have a fixed statute of limitations.
- Secured debts, such as mortgages, may be subject to different enforcement rules.
Legal Actions and Court Proceedings After the Limitation Period
Can a Creditor Still Sue After the Limitation Period?
If a creditor attempts to sue after the limitation period, a debtor can use the “expired limitation period” as a legal defense in court.
What If a Lawsuit Is Filed After the Limitation Period?
- The debtor must respond to the lawsuit and inform the court about the expired limitation period.
- If a debtor does not respond, the court may issue a judgment against them, even if the debt is old.
How to Defend Against an Old Debt Lawsuit?
- Check the date of the last payment to confirm the limitation period has expired.
- Do not acknowledge the debt or make payments if you believe it is statute-barred.
- Seek legal advice if you receive a court notice.
Can a Debt Collector Still Contact You After the Limitation Period?
Debt collectors can still call you after the limitation period, but they cannot sue you or threaten legal action.
Your Rights Regarding Collection Calls
- Debt collectors must follow Ontario’s consumer protection laws.
- You can request communication in writing only to limit calls.
- If a collection agency violates the law, you can file a complaint with the Ontario Ministry of Public and Business Service Delivery.
How to Stop Harassment From Debt Collectors?
- Send a written request asking them to stop calling.
- If they continue harassing you, report them to Consumer Protection Ontario.
- Do not confirm or acknowledge the debt, as this could restart the limitation period.
How Does the Statute of Limitations Affect Credit Reports?
Even though a creditor cannot sue after the limitation period, the debt can still appear on your credit report for several years.
How Long Do Debts Stay on Credit Reports?
- Unpaid debts remain on your credit file for six years from the last payment.
- Paid debts may still show for six years, depending on the credit bureau.
- Statute-barred debts will not automatically be removed; they only disappear once they exceed the reporting period.
Can a Creditor Re-List a Debt on Your Credit Report?
- If a debt is resold to another agency, it should not restart the reporting period.
- Some creditors may attempt to re-age debts to keep them on your report longer, which is not legally allowed.
What Are Your Rights When Dealing With Collection Agencies?
Key Consumer Protection Laws in Ontario
- Collection agencies must provide written notice before contacting you.
- They cannot call more than three times per week.
- Agencies cannot discuss your debt with friends or family unless they co-signed the debt.
What Can You Do if a Collection Agency Breaks the Rules?
- Keep a record of all communications and request written correspondence.
- File a complaint with Consumer Protection Ontario if they violate collection laws.
- Do not be pressured into payments if the debt is past the limitation period.
Should You Pay an Old Debt That’s Past the Limitation Period?
Once a debt is past the limitation period, you are not legally required to pay it. However, there are pros and cons to consider.
Reasons to Pay a Statute-Barred Debt
- Moral obligation to repay what you owe.
- Potential to negotiate a settlement for a lower amount.
- Improves creditworthiness if the creditor agrees to update your report.
Reasons Not to Pay a Statute-Barred Debt
- Making a payment can restart the limitation period, allowing the creditor to sue.
- If the debt is no longer on your credit report, paying it will not improve your credit score.
- Collection agencies may pressure you unnecessarily, even though they cannot sue.
How to Decide Whether to Pay?
- Assess your financial situation before making a decision.
- Seek legal advice if unsure about the consequences.
- Do not agree to payments unless you are fully informed about the risks.
Conclusion
Understanding the statute of limitations on debt in Ontario is essential for making informed financial decisions. While debts do not disappear, creditors lose the legal right to sue after the two-year limitation period.
However, debtors must be cautious about actions that can restart the limitation period, such as making payments or acknowledging the debt.
If you are dealing with old debts, it is important to know your rights and handle collection agencies properly. Seeking professional advice can help you navigate your financial situation and avoid unnecessary legal risks.
FAQs
What Is the Legal Time Frame for Debt Collection in Ontario?
In Ontario, the statute of limitations for most debts is two years from the date of the last payment or acknowledgement.
Can a Collection Agency Sue You for an Old Debt?
Once the two-year limitation period has passed, a creditor cannot take legal action to recover the debt.
Does Acknowledging a Debt Restart the Limitation Period?
Yes, acknowledging a debt in writing or making a partial payment can reset the two-year limitation period.
How Can You Prove That a Debt Is Statute-Barred?
You can prove a debt is statute-barred by checking payment records and confirming that the last payment was over two years ago.
