Limitation of debts

When do debts become time-barred? And can you as a debtor do anything to extend and interrupt this limitation period?

In this article, we take a closer look at the statute of limitations of debts and when you as a business owner (creditor) can no longer do anything to collect the debt.

If your debt expires, it is legally lost and you lose your receivable - fortunately, you can extend (interrupt) the statute of limitations.

When do debts become time-barred?

As a general rule, all debts become time-barred after 3 years, for example those arising from an unpaid invoice - or similar claims that typically do not have a signed document behind them.

In the case of other debts, such as those obtained on the basis of a foundation, a judgment in the bailiff's court or civil court, a signed settlement, a voluntary settlement or other legal loan agreement where both the debtor and creditor have signed the agreement - a limitation period of 10 years applies.

Most loan documents are designed to expire after 10 years - like a bank debt, for example.

When does the limitation period start?

In practice, under normal circumstances, the start of the limitation period is calculated from the date of the due date, for example the payment deadline on an invoice or the due date on a loan or similar.

However, the legal definition of the start of the limitation period is somewhat more complicated - and you have to start with the Danish Act on the Limitation of Claims (Limitation Act) §2. The Limitation Act states that the limitation period starts "from the earliest time at which the claimant could claim to have the claim satisfied". In other words, the start of the statute of limitations is usually calculated from the date when the invoice could be expected to be paid (the payment deadline).

What are the consequences of being a parent in debt?

parent's debt and you, as a creditor, have not actively done anything to extend (interrupt) this limitation period. The consequence of this is that you can no longer legally do anything to get your claim paid. In other words, the claim is time-barred and therefore legally lost.

Neither lawyers, debt collectors nor courts can do anything once your claim is time-barred. In other words, if you have an invoice that is older than 3 years and the statute of limitations has not been interrupted - the claim is time-barred and should be credited and considered lost.

Can the limitation period be interrupted (extended)?

Yes, whether your claim is time-barred after 3 or 10 years, the limitation period can be extended - legally referred to as interruption of the limitation period.

As a creditor, you can interrupt the statute of limitations yourself using a promissory note, a demand for payment through the bailiff's court, the civil court or get a debt collection company or lawyer to help you.

When should debts be recovered?

All debts that are not time-barred can, and should, be recovered.

However, our recommendation as a debt collection company is that you as a creditor actively do something to collect your outstanding debt - and that you do something active as early as possible in the process; debt collection in the form of self-collection, debt collection with the help of a debt collection company or debt collection through a lawyer.

In our experience, the longer it takes from the payment deadline until you actively take action, the less likely you are to get your money back.

Help to interrupt the statute of limitations on your debts?

At Collectia, we help thousands of small and large companies every day with their unpaid invoices in the form of effective debt collection - and of course also with assistance to interrupt the debt so you can continue or start collection.