As the next article in our series, we will address the province of Alberta.
The Limitations Act of Alberta
Alberta’s Limitations Act (Revised Statutes of Alberta 2000, Chapter L-12) details what debts can be claimed with or without a judgment.
On a basic claim of liability, it states that a debt is good for two years “after the date on which the claimant first knew, or in circumstances ought to have known” of the amount owed. This allows two years for legal action.
There is also an absolute limit for a debt of “10 years after the claim arose”, negating a judgment after ten years if not enforced.
As with other provinces, the date of limitation can be “reset” by a payment or acknowledgement of the debt. The Limitations Act is clear on the matter, stating that a payment must come from the debtor, an acknowledgement must be in writing, and signed by the debtor. An interesting fact is that acknowledgement of a debt does not necessarily require a promise payment, and can eve include a refusal to pay.
Another interesting fact in the Act is that the limitation period is suspended if the creditor is a person under disability, for whatever period they are disabled. Proof is on the creditor to prove the period of their disability, however.
For further information on the Limitations Act of Alberta, follow the link below
http://www.qp.alberta.ca/documents/Acts/L12.pdf
The Credit Bureau
The provincial laws that affect the credit bureau are the Fair Trading Act and the Credit and Personal Reports Regulation. The limits outlined in these laws state that a credit report cannot include “unfavorable information about a debt is more than six years has elapsed since the date of last payment on that debt or the date the debt was incurred, whichever is later”.
Interestingly, while a judgment can be enforced for ten years, according to the Credit and Personal Reports Regulation, it cannot be listed on the credit bureau for “more than six years after the judgment was given, unless the creditor or creditor’s agent confirms the judgment remains unpaid in whole or in part, and the confirmation appears in the file”.
The provincial regulations also allow a consumer to add a statement of 100 words or less detailing why certain information is not accurate or complete, which must be included by the credit bureau in any report provided.
The Credit and Personal Reports Regulation can be found here:
And the Fair Trading Act is found at the following link:
Older Debts
Often creditors will continue to pursue a debtor on a debt older than six years. However, the creditor, debt buyer, or collection agency representing them generally has no legal recourse if the debtor refuses to pay. Many collection agencies seek to pursue on older debt, but this is a gray area that should be entered into carefully by both third parties and creditors.
Note that as discussed above, the Limitations Act states if a debtor sends in a written refusal to pay, that can restart the option for legal action or registration to the credit bureau.
Bad Debt Write Off
When a company writes off accounts receivable amounts, it has no impact on whether it can be pursued or not. Small businesses often think it prevents them from collecting the account in the future, which is false – there is merely some bookkeeping to be done to account for the loss, and later recovery. If a debt has been written off, it is simply no longer counted on the balance sheet of the company as accounts receivable, which is an asset. The bad debt write-off removes it from accounts receivable. Should the funds be later recovered, it can be reflected as income upon remittance. For a complete explanation, consult with your accountant.
Student Loans
There is a special exception to student loans. As of July 8, 2008, Section 178 of the Canadian Bankruptcy and Insolvency Act was changed that affected all provinces, and states that student loans will not be discharged or forgiven through bankruptcy unless they file at least seven years from the date they ceased to be a part-time or full time student, unless they are granted a special exception by the Supreme Court in Bankruptcy. There are a number of fine details to the rules surrounding student loans, and would be a complex subject to be fully addressed in a separate blog article.
Conclusion
Limitations are an inevitability no matter what province you are in. All creditors should have a plan on how to address their debts in a timely action. I recently had a client list a file with our firm for legal action, with only two weeks remaining to file a claim – much scrambling was necessary. Plan ahead, and decide a reasonable time line for enforcing your receivables.
Files should receive a final demand notice from your company no later than 180 days, and the ideal period would be 60 to 90 days. Files should be assigned to a third party collection agency no later than 240 days, and the ideal period would be 120 days. Legal action should be initiated, if necessary and the likelihood of garnishment or asset seizure is strong, no later than 18 months, but ideally by 360 days.
As always, if you have any questions regarding the pursuit of receivables, and the legal recourse of the creditor to secure their debts, you are certainly welcome to contact myself.
Blair Wettlaufer
Kingston Data and Credit
Cambridge, Ontario
226-444-5695
http://www.kingstondc.com/
bwettlaufer@kingstondc.com
Let's say a debt is 10 years old. No admission to the debt was given, no payment. The debt Is not on the person's credit report. Can a collection agency , just report a debt after the credit reporting period is over. There are some dirty collection agencies known to re-age the account by falsifying the date, to act as a new account.
ReplyDeleteDefinitely not ... once it's past six years from the date of first delinquency, it cannot be reported, period. Yes, some agencies are given bad data or invent deliquency dates to report, and in those cases it should be disputed with Equifax and Trans Union.
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