Canadians with old debts beware: a momentary slip or lack of knowledge of your legal rights could result in past debts rising from the dead and coming back to haunt you.
Zombie debt — old accounts that may have been written off as “uncollectable” and which have passed the statute of limitations — is expected to increase due to Canada’s high level of consumer indebtedness, say insolvency experts.
Canadians have taken advantage of cheap money, with total debt per consumer surging to $71,979 in the second quarter, up from about $57,000 five years earlier, according to credit monitoring service Equifax.
Delinquencies are expected to rise once interest rates eventually climb and put stress on the ability of some borrowers to make payments.
“(Debt) is increasing faster. So I would be concerned that there is a jump in people who are finding themselves unable to pay their debts,” says Julie Kuzmic, Equifax Canada’s director of consumer advocacy.
That would lead to more accounts going to collection agencies and aging even after the original creditor loses interest in collecting.
“As you get a higher consumer debt level, more and more of those — just by the sheer statistics alone — are going to be older debts,” says Scott Terrio, manager of consumer insolvency at Hoyes, Michalos & Associates, a Toronto-based company specializing in insolvency.
Statute of limitations laws across the country protect consumers from lawsuits if their unsecured debt hasn’t been repaid within the allotted time.
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The statute of limitations is two years in Ontario, Alberta, Newfoundland and Labrador, B.C., P.E.I. and Saskatchewan. It’ ..
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