Do I have to pay an old debt?
If a debt collector or lender has asked you to pay a debt that is more than six years old it is important to know your rights
You may not have to pay an old debt if you made your last payment more than six years ago. In this case, the debt may be statute barred, which means you may have a defence if someone commences legal action against you.
How do I know if a debt is statute barred?
A debt might be statute barred if:
- you haven’t made a payment for at least six years (note that some debts have a 15 year limitation period – read more to understand your rights);
- you haven’t admitted in writing that you owe the debt; and
- no court judgment has been entered against you.
Most court judgments in Victoria for debts under $100,000 are registered with the Magistrates’ Court of Victoria. Remember it is possible that judgment might have been entered in another court or interstate.
You can find out if a court judgment has been entered against you in the Magistrates’ Court of Victoria by:
- contacting the Magistrates’ Court in Melbourne ph: 03 9628 7777, or
by emailing firstname.lastname@example.org; or
- asking the debt collector or lender for the court judgment number and checking that with the court; or
- getting your credit report and checking if a judgment is recorded.
The fact sheet ‘Credit reporting – getting a free copy of your credit report‘ has information about accessing your credit report.
Be aware that if you make a payment or an admission that you owe the money in writing, the six year period will start all over again and your debt will no longer be statute barred.
What if the debt collector tells me that judgment has been entered against me?
Ask for proof. Don’t accept a debt collector’s word for it. If a judgment has been entered against you, you should have received court documents informing you that the debt collector or lender had commenced legal proceedings.
If action is taken in the Magistrates’ Court, this document is called a Form 5A or a Complaint. The Complaint is served with two copies of the form on which you can complete your defence and warns you that you have only 21 days in which to do this or an order may be made against you.
What should I do if someone says that I have to pay an old debt?
If you think it might be more than six years since you last made a payment on the debt, or acknowledged the debt in writing and you are not aware that any court judgment has been made against you:
- don’t make a repayment;
- don’t agree that you owe the debt;
- do get advice immediately; and
- do ask the debt collector or lender to provide copies of the loan contract and the account statements.
When does the six year time limit not apply?
The creditor has more than six years to collect the debt if:
- the debt relates to a mortgage over property (such as a house or car) in which case a 15 year limitation period applies; or
- there is a court judgment that states a debt is owed.
If a lender had a mortgage over your house or other property and it has been sold and you still owe money; the lender might claim that the six year limitation period does not apply. This is a complex issue and getting legal advice is recommended.
What should I do if I get contacted about an old debt?
Unless you are sure the debt isn’t statute barred, do not admit to the debt or make any payment. However, you should request in writing, details of the debt being claimed and ask the lender or debt collector to stop any legal action until after the information is provided. In your letter, ask the lender or debt collector to provide:
- copies of the contract if you don’t have a copy;
- copies of relevant account statements; and
- details of any court judgments.
You should include a sentence in the letter saying that you ‘do not admit that you are liable for the alleged debt’. If you have already received a court document, you should immediately lodge a complaint with the relevant external dispute resolution scheme.
If there is no relevant EDR scheme you should seek legal advice about lodging a defence – even if the lender says that it won’t take the matter any further.
Keep notes of all letters (received and sent) and telephone conversations you have with the debt collector or lender about an old debt. You might need to use these to prove at a later time that the lender has agreed not to pursue the debt.
Consumer Action Law Centre: Do I have to pay an old debt? (fact sheet)
The funding for this fact sheet was provided by the Victorian and Australian Governments.
The information on this fact sheet is general and does not constitute legal advice.
MoneyHelp’s products and services have been prepared for the information of Victorians who are experiencing financial difficulty. Phone 1800 007 007 to speak to a MoneyHelp financial counsellor. A financial counsellor will discuss a range of debt payment options based on an individual’s circumstances.
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Last updated April 2016