In Australia, the law sets a time limit — called a limitation period — within which legal proceedings to recover a debt must be commenced. For most simple contract debts, this is six years from the date the debt became due, though the exact period varies by state and territory and by the type of debt.
Once the limitation period has expired, the debt is said to be statute barred. A statute-barred debt still exists — the obligation to pay does not legally disappear — but the creditor can no longer start court proceedings to enforce it.
A few important points:
- The limitation clock can restart in certain circumstances — for example, if the debtor acknowledges the debt in writing or makes a part payment. This can revive the creditor's right to sue even on an older account.
- Statute-barred status does not automatically mean a creditor will stop contact. It limits court action, not all forms of recovery.
- If you believe a debt may be statute barred, you can raise it as part of a dispute. See the article on disputing an old debt for more.
If you are uncertain about the enforceability of a particular debt, a free financial counsellor or community legal centre can give you independent guidance specific to your state and circumstances.
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