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Author: Christopher Liew, CFA
Last Updated:February 03, 2023
Are you in debt in Canada, and the creditors are calling? If so, you might have heard from someone that if you were to wait long enough, your debt could vanish like a puff of smoke in the wind.
Is that statement fact or fiction? Exactly how long can a collection agency collect on a debt in Canada?
Table of Contents show
Statute of limitations in Canada for unsecured debt
The statute of limitations of Canada’s Federal and Provincial Government state that there is a maximum legal time that a lender or creditor has to pursue legal action on your unsecured debt.
Legal action could go as far as garnishing your wages to pay back your creditor.
The law states that if the unsecured debt is not collected and payments are not made within a certain time frame, creditors and collection agencies can’t take legal action against you.
The Federal Government of Canada has a statute of limitations of six years where after that debt can’t be pursued.
| Province | Number of Years |
|---|---|
| British Columbia | 6 |
| Alberta | 2 to 10 |
| Saskatchewan | 2 |
| New Brunswick | 6 |
| Newfoundland | 2 |
| Nunavut | 6 |
| Nova Scotia | 6 to 10 |
| Northwest Territories | 6 |
| Ontario | 2 |
| Quebec | 3 |
| Prince Edward Island | 6 |
| Yukon | 6 |
Example of outlasting the statute of limitations for your debt
Imagine a scenario where you live in British Columbia and have missed your payments on your unsecured credit card bill.
Your debt collector has up to six years to collect the outstanding debt and pursue legal action against you. After these six years, if you still haven’t made any payments, your debt collector can’t take legal action against you.
Your statute of limitations could reset
Be careful because there are two ways your statute of limitations could be reset and your creditors could still pursue legal action against you:
- If you acknowledge the debt in writing or verbally in any way, your statute of limitations period could reset.
- If you make a payment towards your debt, your statute of limitations could reset.
If your creditors come calling, be cautious about what you say regarding your debt, and try to ask for information only without giving any definitive answer until you have all the facts.
Downsides of waiting out your debt
Ok, so we just went over that, yes, your debt can’t be legally pursued by your creditors or lenders after a certain amount of time. But before you rush off and hide from your creditor for several years, here are the reasons why that might be a bad idea:
- The damage to your credit score will build up over the years that you are running from your creditors. It will be very difficult to climb out of this hole and get credit again.
- The collection agency could sell your profile to debt collectors even after the statute of limitations is over. This could mean a lifetime of harassing phone calls and mail.
Unsecured debt vs secured debt
Keep in mind that the statute of limitations only applies to unsecured debt. Here are some examples of unsecured and secured debt:
Unsecured debt
Typically, unsecured debt could be:
- Unsecured Credit card debt
- Personal loans in smaller amounts
- Student loans
- Phone companies
- Internet service providers
- Cable television
Secured debt
When you provide something as collateral against your debt, your debt is likely secured:
- Certain credit cards can be secured against assets you own
- Mortgage debt on a home
- Car loan
Collection agencies in Canada
A debt collection agency specializes in recovering unpaid debt. After you stop making your debt payments, you may be contacted by one of these agencies.
EOS Canada
An international company operating in over 25 countries, EOS Canada is one of the biggest debt collection companies in Canada.
CBV Collections
In operation since 1921, CBV is one of the oldest collection services in Canada today.
Conclusion
While it is technically true that you can outlast your debt and it is wiped from your credit record, the damage that will have been done will leave scars that will last a very long time.
It might be difficult for you to get any credit going forward, so think it through before deciding to try this strategy of outlasting the statute of limitations.
Christopher Liew, CFA
Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.
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