Statute of limitations
Many businesses and traders are unaware that their financial claims against their customers - such as invoice claims or other payment claims - become time-barred.
Obsolescence is a legal term that indicates that a claim or receivable will become time-barred. For example, if an invoice claim is time-barred, it will no longer be possible to claim the amount. If the claim is time-barred, debt collection is also not possible - neither with a debt collection company nor with a debt collection lawyer.
Limitation of claims, including limitation of debts and invoices, is regulated in the Executive Order on the Limitation of Claims Act (Limitation Act):
Most debts generally expire after 3 years - or 10 years, depending on the type of debt.
Note that there are special rules for the statute of limitations for fines, damages and the like. In this post, we focus on what we get asked about most often; statute of limitations for invoices and debts between companies and customers. Please note that there are special rules for statute of limitations for fines, which are not covered in this post.
Which claims expire after 3 years?
The vast majority of monetary claims between two companies, or between a company and a private individual, are simple claims. A simple claim is a claim consisting of an unpaid invoice or overdraft.
Invoice claims become time-barred after 3 years, unless you as a creditor actively interrupt the limitation period.
The vast majority of debts and money claims between two companies, or between a company and a private individual, are simple claims. An example of a simple claim is an unpaid invoice. Invoice claims become statute-barred after 3 years, unless you as a creditor or your debt collection company actively interrupt the statute of limitations.
Which claims expire after 10 years?
As a general rule, all claims other than simple claims become time-barred after 10 years. These are typically claims that are acknowledged in writing, where the debtor has actively signed and acknowledged owing a certain amount.
This could be, for example, a bank loan, promissory note or a debt declaration where the borrower or debtor has signed it. Other debts that have a limitation period of 10 years include judgments, voluntary settlements, court orders for payment, etc.
Can a statute of limitations be extended?
If a statute of limitations is extended, this is known in legal terms as an 'interruption of limitation'. An interruption of limitation can occur for both claims with 3 and 10-year limitation periods.
A creditor cannot simply interrupt the limitation period by continuously reminding the debtor of their outstanding balance, but can, for example, ask the debtor to acknowledge their claim in writing or verbally. This could be done, for example, by the creditor asking the debtor to sign a statement of debt confirming that the debtor owes a certain amount, such as an invoice claim.
The limitation period can also be interrupted by obtaining a judgment or a payment order from the enforcement court.
As a creditor, you can interrupt the statute of limitations yourself or get help from your debt collection company or debt collection lawyer. If you want the statute of limitations to be interrupted, it is important that you actively take action yourself.
Most debt collection cases that are running with a lawyer or debt collection agency will often be automatically attempted to be discontinued. Talk to your debt collection agency about what the procedure is with your debt collection cases.
When is the start date of the statute of limitations
We generally recommend that you start counting the limitation period from the payment date on an invoice if it is issued in direct connection with the delivery of goods. For example, if an invoice should have been paid on January 1, it will therefore expire on January 1, 3 years later.
The statute of limitations paragraph on "Commencement of limitation periods" states that "The limitation periods are calculated from the earliest time at which the creditor could claim to have the claim satisfied".
In practice, this means that if a debtor is supplied with goods and the creditor only invoices this long after it could have been invoiced and thus "the creditor could demand satisfaction of the claim", the limitation period may in some cases be considered to be closer to the time when it could be expected that an invoice should have been sent - that is, closer to the time of delivery.
In practice, we find that it is often the invoice that forms the basis for the limitation period. We recommend that you as a creditor start the process of interrupting the limitation period in good time - for example 6 months before the limitation period.
Is interrupting the statute of limitations always a good idea?
In general, it is always a good idea to have a longer limitation period - rather than a short limitation period.
Because all history shows that a debtor's financial situation will age over time - and often for the better. In other words, there is a greater chance that a debtor's financial situation will improve in 10 years - than in 3 years.
Therefore, you should always strive to get a debtor's written acknowledgement of a debt.
However, we recommend that you consult with your debt collection agency or lawyer about extending a specific case - for example, some cases may have such a low principal amount that it may not be worthwhile. Other debtors' financial circumstances may be so bad that the claim must be considered lost.
