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Statute of limitations

Statute of limitations

Few companies realize it, but debts, including invoice claims, are time-barred. This is basically regulated by the Limitation Act, which sets the framework for when different types of debts become time-barred.

In this article, we do not focus on the entire Limitation Act, but rather on the areas of the Act that we are most often asked about. We therefore do not focus on the limitation of claims arising from damages, compensation and the like.

What does the law say about prescription?

The subject of limitation is regulated in the Executive Order of the Act on the Limitation of Claims, or in common parlance the Limitation Act.

The Limitation Act defines what limitation is, when limitation occurs, how limitation is interrupted and, most importantly, how different debt claims can differ.

The current statute of limitations is from 2015, but we always recommend that you check if a new law has been passed in this area and use the current text as a starting point.

When is a claim time-barred?

Basically, two types of limitation are distinguished: 3 years and 10 years.

Most claims a business may have against a customer basically expire after 3 years, for example an invoice.

When a business issues an invoice to a customer, this claim is generally time-barred after 3 years. This means that a business cannot claim payment for an invoice older than 3 years or refer the case to, for example, a lawyer or a debt collection agency once the 3 years have passed.

The 10-year limitation period applies, for example, to promissory notes or other types of loans to a bank. In other words, if your business has a promissory note with a customer, this claim becomes time-barred after 10 years.

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Can the limitation period be extended?

In general, debts become statute-barred after 3 or 10 years, but you can often extend this. The legal term for extending a limitation period is 'interruption of prescription'.

Interruption of the limitation period is regulated in Chapter 5 of the Limitation Act. 

There are several ways to interrupt a limitation period, for example

In other words, you can interrupt the limitation period by getting a customer's written acknowledgement that he or she owes you the money - preferably in the form of a promissory note. This promissory note has a limitation period of 10 years.

You can also get a lawyer or a debt collection agency to help you interrupt the limitation period for your debt with a creditor. However, we recommend that you do this in good time (at least 6 months)

Is it a good idea to interrupt the limitation period?

We are often asked whether it is worth interrupting a statute of limitations. It is fundamentally difficult to give general financial advice without knowing the individual circumstances. But in general, if a debt is extended from 3 to 10 years, there will be a (theoretical) chance that the debtor's financial situation has changed and thus the possibility to start an installment plan or make a full payment.

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