What is the Statute of Limitations on Debt in Canada?
The statute of limitations on debt in Canada is the period of time during which a creditor (the entity that extended the credit) can legally enforce the collection of a debt. This period of time depends on several things, including the province you live in and the type of debt you (the debtor) owe.
In this blog, we’ll break down the statute of limitations based on province. We’ll also discuss how to know which province your debt is in, when the statute of limitations starts, and which debts will be affected.
In addition, we’ll also take a look at some of the tricks debt collectors use to extend this statute of limitations so that they have more time to collect and initiate legal proceedings.
A word of caution – we are not lawyers nor is our firm licensed outside of the Maritimes. The information in this blog is meant to be general in nature. If you are facing a legal issue whereby you believe the statute of limitations may be important to you, do not rely on this article. Instead, we strongly recommend you seek the advice of the Licensed Insolvency Trustee or legal advice in your province.
Statute of Limitations on Debt in Canada by Province
Let’s take a look at the statute of limitations on debt in Canada by province. After that, we’ll get into a little more detail regarding the type of debt that’s eligible to expire and what you can do to ensure this statute of limitations doesn’t get extended.
| Province | Statute of Limitations | Citation |
| Alberta | 2 Years | Limitations Act, RSA 2000 |
| British Columbia | 2 Years | Limitation Act, SBC 2012 |
| Manitoba | 6 Years | The Limitation of Actions Act, CCSM c L150 |
| New Brunswick | 2 Years | Limitation of Actions Act, SNB 2009 |
| Newfoundland and Labrador | 2 Years | Limitations Act, SNL 1995 |
| Northwest Territories | 6 Years | Limitation of Actions Act, SNWT 2003 |
| Nova Scotia | 2 Years | Limitation of Actions Act, SNS 2014 |
| Nunavut | 6 Years | Limitation of Actions Act, SNWT (Nu) 2003 |
| Ontario | 2 Years | Limitations Act, 2002, SO 2002 |
| Prince Edward Island (P.E.I.) | 6 Years | Statute of Limitations, RSPEI 1988 |
| Quebec | 3 Years | Civil Code of Québec |
| Saskatchewan | 2 Years | Limitations Act, SS 2004 |
| Yukon | 6 Years | Limitation of Actions Act, RSY 2002 |
Legislation changes frequently and case law impacts various legislation. As such, we recommend consulting a professional to determine the statute of limitations in your province. The timeframes above may not be accurate.
What Determines Which Province Debt Falls In?
This is a bit of a tricky question. One might assume that the statute of limitations on debt in Canada would be based on the province that you live in. That may not always be the case.
The province your debt lives in could be dependent on a number of factors, including:
- Contract Jurisdiction – For bank loans, payday loans, or unsecured lines of credit, the contract you sign for the loan will typically dictate the province where the debt lives.
- Debtor Location – For something like a personal or family loan, where contracts are a little more lax, the debtors’ location will most likely be where that debt resides, and it could possibly move with you, the debtor, from province to province.
- Creditor Location – If no province is listed in the terms of the debt, a creditor may choose to try to collect the debt based on the province they reside in. This would be especially true if they’re located in a province with a long statute of limitations.
- Debt Incurred – Again if your debt contract doesn’t stipulate a province, your creditor may choose to file legal proceedings where the debt was incurred.
- By Agreement – If both parties can come to an agreement as to which province a debt should reside in, this could be accepted by the courts in that province.
- Court Decision – Should the debt contract not list a province, and if the debtor and creditor can’t agree on a province to litigate the debt, where that debt resides could be based on a court decision.
So, how do you know where your debt actually resides? First, find all of the paperwork for the loan in question. If a province or address is listed for the creditor, that will most likely be where your debt resides.
If no province is listed, ask whoever is attempting to collect this debt what province the debt resides in and why. They will generally need to supply you with this information so that you can better defend yourself against the collection of that debt.
When Does the Statute of Limitations on Debt in Canada Start?
The clock starts ticking on the statute of limitations on debt the day that your first monthly payment is due. This is a fluctuating date, though. Each time your monthly payment is due, or each time you make a payment on that debt, the statute of limitations starts over.
So, if you take out a payday loan on January 1, 2024, and never once make a payment, that debt will become unenforceable in 2-6 years, depending on the province. Each time a payment on the debt comes due or is made, the time frame for the statute of limitations starts over.
What Debt is Included in the Statute of Limitations on Debt in Canada
Only unsecured, non-governmental debt should be considered when discussing the statute of limitations on debt in Canada. This includes:
- Credit Card Debt
- Personal Loans
- Payday Loans
- Overdue Utility Bills
- Certain Medical Bills
- Unpaid or Overdue Rent
These are the only types of debt that expire under a provincial statute of limitations.
What Debt is Not Included in the Statute of Limitations on Debt in Canada
Numerous types of debt don’t fall under the ‘normal’ rules of a provincial statute of limitations on debt in Canada. These types of debt include:
- Secured Debt (mortgage, car loan, boat loan, etc.)
- Child or Spousal Support
- Court Fines
- Student Loans
- Tax Debt
- Court Judgements
- CRA Debt
- Government Debt
- Debts arising from Fraud
In addition, if a creditor has taken legal proceedings against an unsecured debt or if they have already obtained a court judgment against an unsecured debt, that debt can no longer be considered under the provincial statute of limitations.
Court Judgments and the Statute of Limitations on Debt in Canada
If a creditor has already won a judgment against you for unsecured debt you owe, that judgment will be valid for significantly longer than the statute of limitation time period. They can generally be extended as well if renewed within applicable deadlines. Judgment debts, if extended, can generally be collected for 20+ years.
Tax Debts and the Statute of Limitations
Under the Income Tax Act, the Canada Revenue Agency (CRA) has a six or ten year collection period to collect overdue or unpaid taxes. This statute of limitations on tax debt can be extended depending on actions you or CRA take.
What Happens After the Statute of Limitations on Debt in Canada Expires?
Let’s assume a very straightforward scenario where we know the exact province our debt is located in. Let us say we have a $1000 phone bill in the province of New Brunswick, and you haven’t made a payment on this debt in 2 years.
We’ll also assume the creditor will allow this debt to expire without initiating legal action. Viola! That debt has officially expired, and it cannot be reset. I guess that means you no longer owe that debt. Right? Unfortunately, that’s not the case.
That debt is still there, and you still owe that debt. The only difference is that the creditor has no legal recourse to collect that debt. They can still call you, they can still send you letters demanding payments, and they can still report your debt to credit reporting agencies.
What they can’t do after the statute of limitations expires is initiate any legal actions to recoup that debt.
How Does the Statute of Limitations on Debt in Canada Affect Your Credit Rating?
If you’re concerned about when an unsecured debt expires, chances are that debt has already negatively affected your credit rating. Even after the statute of limitations on debt in Canada has expired, that debt will still follow you, wreaking havoc on your credit rating.
It takes six years after you’ve made your last debt payment before this debt will drop off your credit rating. Your credit rating may take considerably longer to recoup after the debt falls off.
Tricks Debt Collectors Use to Re-Age Your Debt
We mentioned earlier that the statute of limitations on debt in Canada fluctuates. Each time there is a new due date or a new payment is made on that debt, the timing starts over. The debt has been legitimately re-aged, and a new statute of limitations has been assigned.
There are some tricks, though, that creditors use to re-age your debt when they’re looking for more time to collect that debt. A couple of tricks they can use to re-age your debt are:
- Asking for a good-faith payment.
- Asking you to, somehow, acknowledge the debt.
If a creditor is assuming that they’re not going to get paid, they will try to use one of these techniques to drag out the statute of limitations for as long as possible. This gives them more time and options to collect this unsecured debt legally.
Debt Re-Aging Examples
Let’s go back to that $1000 unpaid phone bill in New Brunswick. After 18 months, the phone company may decide that selling that debt makes more financial sense than trying to collect it. So they sell it for pennies on the dollar to a collection agency.
This collection agency will call you or contact you by mail to let you know they have taken over your debt. They may question if you understand which debt they’re taking over and if you’re familiar with it. They will generally try and be ‘reasonable’ with you and ask for a small payment as a show of good faith.
As soon as you’ve made this payment on the debt, the statute of limitations starts all over. Instead of having 6 months left before the statute of limitations on that debt expires, it’s now re-aged back to 24 months.
Understanding the Statute of Limitations on Debt in Canada
Understanding all you can about the statute of limitations on debt in Canada can help you understand your options better when dealing with debt you’re unable to repay. Let’s do a quick recap of everything we’ve learned:
- The statute of limitations on debt in Canada is the amount of time a creditor has to collect a debt legally.
- The statute of limitations differs based on province but usually lasts 2-6 years.
- The province your debt lives in can be based on numerous factors.
- The statute of limitations on debt in Canada re-starts every time you make a new payment or acknowledge the debt.
- The provincial statute of limitations on debt is only good on unsecured debt.
- You still owe a debt, even after the statute of limitations has expired.
- Once a debt has expired, a creditor has no legal recourse to collect it.
- Expired debt can stay on your credit report for up to seven years.
- Debt collectors will attempt to re-age your debt so they have more time to collect.
If you’re struggling to pay your existing debt, reach out to us before your creditors take legal action. We can help make burdensome, unsecured debt payments a thing of the past. No matter how long until the statute of limitations on it expires.