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Under statute, unsecured debt becomes unrecoverable 6 years after the limitation period begins. This is particularly important to consider in estate planning, where the concerned parties may accumulate substantial amounts of debt over many years, surpassing the 6-year limitation period.
If the person who loaned the money (“the creditor”) is not aware of the limitation period, they may believe their executor could recover the debt owed to the creditor, to become part of the creditor’s estate. Evidently, this is not always the case.
It can be difficult to determine when the limitation period begins. Generally, the limitation period will begin when a debt becomes due. This will depend on the contractual terms between the parties.
However, this does not mean that debt accrued decades ago cannot be recovered. The limitation period can be extended, thereby extending the window for recovering the debt. Simple acknowledgement of the debt restarts the limitation period. Acknowledgement can be achieved by:
1. The debtor making a payment; or
2. The debtor explicitly or implicitly acknowledging the debt in writing.
Whether the limitation period has restarted is determined on a case-by-case basis.
Even if a loan is unrecoverable, you make be able to include a specific provision in your will to take the loan into account. If you would like specific advice about your circumstances, please contact MJM Lawyers.
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Disclaimer: This post contains information of a general nature only and is not intended to be used as advice in relation to a specific matter. Although every care has been taken in preparing the document, it may not be accurate or complete, particularly in the context of specific circumstances. MJM Lawyers disclaims responsibility for any errors or omissions.
