In some cases, the debtor may avoid paying his debt. This situation occurs when the so-called limitation of debt. Few debtors are aware that the liability may become time-barred over time. The amendment to the provisions of the Civil Code in 2019 introduced some changes in the discussed issue. What? Can any debt be time-barred? What are the consequences of this? Can I take another loan or credit if I have an expired debt?
Limitation of debt – what is it?
Limitation of debt is also called past due debt. This situation occurs when, after a specified period, the debtor can avoid paying his debts. This only happens if, from the time the debt is incurred to the time limit set by law, the creditor does not take any action to recover the outstanding debt.
In some countries, the statute of limitations for debt is tantamount to the fact that the obligation ceases to exist. In Poland, on the other hand, limitation of debt means that the creditor is not able to pursue the claim, but the obligation itself still exists. However, the debtor is not legally obliged to pay the debt.
It is also worth mentioning that people who pay back a barred obligation cannot demand a refund.
When does the debt expire?
When we make a commitment, we must reckon with it. Customers are informed about this when concluding the contract. However, unforeseen financial problems may result in the debtor being unable to pay the debt on time. It will likely go to debtors’ registers. However, as it turns out, a person who does not pay their liabilities can count on the statute of limitations on debt.
The liability may be time-barred if the creditor does not demand repayment of the debt and the debt collector does not start taking action to collect the outstanding amount. According to Article 117 of the Civil Code: after the limitation period has expired, anyone against the claim may decline to satisfy it, unless he waives his claim of limitation . In practice, the statute of limitations for debt results in its expiration and there is no obligation to repay it.
The amendment to the provisions of the Civil Code in 2019 caused that the limitation periods were shortened. This change is assessed by the head of the Warsaw bankruptcy court: Shortening the limitation period is a natural consequence of the pace of life of a modern Pole and low care for long-term storage of proper documentation, especially the private one. Conducting disputes many years after the incident is also extremely difficult for courts, because of understandable reasons there are deficiencies in documentation and the memory of witnesses becomes very unreliable. Therefore, changes should be assessed positively . Source of quote: Faster debt limitation and court assistance for the debtor in a dispute with the creditor.
How do you calculate the limitation period?
The limitation period is counted from the day on which the creditor could demand payment from the debtor, e.g. from the day following the expiry of the payment period. The limitation period, however, is interrupted by certain actions taken by the creditor, including referral to court. It may also be interrupted by: initiation of mediation between the parties or recognition of the claim by the debtor.
What debts are not time-barred?
Not all debts are barred. In the case of mortgage loans, only interest may be barred. The bank’s collateral for this type of loan is real estate. If the debtor stops paying off the loan, the property may go to a bailiff’s auction, and the bank will recover at least some of the money borrowed from the client.
Limitation of debt – do you have to pay back a barred obligation?
Many people ask themselves whether overdue liabilities should be repaid. Limitation of the debt results in the debtor having no legal obligation to repay the debt. The exception is when he voluntarily decides to settle his outstanding commitment. Sometimes creditors try to collect expired debts by taking advantage of debtors’ ignorance. In such cases, in order not to fall into greater financial trouble, it is worth seeking legal assistance.
The law prohibits the repayment of past due debt. However, this applies when the case goes to court. Creditors often demand debt repayment or sell debt to debt collection companies before they take legal action. These entities usually use the e-court path, which may result in the debtor being unaware of his rights accepting the order for payment. Thus, he will be obliged to pay arrears as a result of interruption of the limitation period.
Interruption and suspension of the limitation period
Two concepts are associated with the limitation period – interruption and suspension. Interruption of the limitation period takes place at the time when the creditor takes a specific action on debt enforcement. The result is that the limitation period is counted down from the beginning until the end of the proceedings. Activities that interrupt the limitation period may include:
- start enforcing the claim
- referral to court
- settlement between the parties
- debt recognition by the debtor
Suspension of the limitation period, on the other hand, involves deferment of payment or breakdown of the obligation into installments. The suspension may last until the date of the date of payment or the last installment. Thanks to this solution, the debtor does not have to worry about accruing interest for late payment.
Limitation of debt and another loan
It should be taken into account that the limitation period is not unambiguous, but the debt disappears. The liability still exists, but the debtor is not obliged to pay it back. The debtor still remains the debtor and this fact will be recorded in the credit history at the institutions dealing with it, i.e. in the National Register of Debtors or the Credit Information Bureau. The lender – a bank or lending company – will also be able to obtain information about expired debts while checking the customer’s creditworthiness. In this case, the potential borrower must consider refusing to grant him a loan.