07 Apr Debt Prescription: What Does It Mean?
Knowing about debt prescription is crucial to your financial health after taking out loans or using credit facilities. Once you understand prescription periods, you won’t find an old debt and pay it, restarting the prescription period. Moreover, prescription debts may still show up on your credit record, bringing down your score and making qualifying for new credit, insurance, rental properties, or finance roles needlessly tricky.
Prescription debt is debt that is no longer enforceable and has expired. Once a certain period has passed, debt can no longer be recovered, and you may not be prosecuted for defaulting. This happens when neither you nor your creditor has acknowledged the debt for a prescribed period. When a debt has prescribed, you may dispute it on your credit record and have it removed from your name.
Prescription periods vary by the sort of debt. For instance, credit card debt prescribes after three years, but a mortgage only prescribes after 30 years.
This post discusses debt prescription, what it means, and how to write off prescribed debt.
What Debt Prescription Means
Debt prescription is governed by the Prescription Act 68 of 1969. Chapter three introduced debt prescription and described it as when “a debt shall be extinguished by prescription after the lapse of the period which in terms of the relevant law applies in respect of the prescription of such debt.”
The Act says that a debt’s prescription period begins to run as soon as a debt is due. Debts are only prescribed when:
Your creditor has not contacted you regarding a debt, asked for payment, or pursued legal action against you
You have not contacted your creditor, promised to pay the debt, or made partial repayments
If any of these events happen, the prescription period will lapse and begin again.
The prescription periods for different debts are:
- Thirty years for any debt secured by mortgage bond, any judgment debt, and any debt in respect of any tax imposed or levied by or under any law
- Fifteen years for any debt you owe the government or for land it sold or leased to you
- Six years for a debt from a bill of exchange or notarial exchange (generally)
Otherwise, all other debts prescribed when unacknowledged by both parties (you and your creditor) after three years.
Note that prescription periods don’t run when you stop your creditor from knowing about the debt on purpose. In addition, prescription can be delayed from being completed if you’re declared unfit to contract or insane, you’re a minor, you’re married to your creditor, or if the debt is subject to arbitration.
Dispute Your Prescribed Debts
Prescription debt assessments are often part of the debt counselling experience. Debt counselling offers legal protection from judgments and legal action, the opportunity to enjoy reduced interest rates and lower debt repayments, and the expertise of a debt counsellor. Your debt counsellor will help you manage your budget and work with you to create a payment plan that allows you financial breathing room.
If you feel your debts have prescribed, contact Debtco Group. Our team are experts in debts, prescription periods, and how you can go about disputing them.