Credit and Debt

Credit and Debt

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The debt is old

If the client has not made a payment on a debt and has not acknowledged the debt in writing for more than six years, this debt may be statute barred under section 5(1)(a) of the Limitation of Actions Act 1958 (Vic).

If it looks like this is the case, do not acknowledge the debt in writing and advise the client not the make any payments until the status of the debt has been clarified.  You should request details of the debt being claimed using these template letters (letter 1 for goods or services contracts and letter 2 for consumer credit contracts).

If it is a judgment debt (i.e. a court judgment has been entered against the client in relation to the debt) the limitation period is 15 years.   Most judgment debts in Victoria for debts under $100,000 will be registered with the Magistrates' Court of Victoria - you should call the Registry to enquire about any judgment debts your client might have.  It might also be necessary to check whether judgment has been entered in another State or Territory.

If you get a copy of your client's credit report, this will also record any judgments entered. 

A 15 year limitation period will also apply if it is a secured debt (for example, a mortgage over property). 

If the debt is statute barred:

  • write to the creditor explaining that the debt is statute barred and requesting that they stop contacting the client using this template letter; and
  • if the creditor does commence legal action, the fact that the debt is statute barred can be used as a defence (provided that the creditor cannot show that the debt is not statute barred). Refer to defending a claim for more information.