If you want to collect an outstanding debt after a long time, there may be a risk that the debt is time-barred. Claims for damages or claims may also be time-barred. How does prescription work, what are limitation periods, and when do they start to run?
What is a limitation of a claim?
A claim is time-barred if the creditor does not take action to ensure the claim is paid for an extended time. Once the limitation period has expired, the creditor can no longer enforce the claim through a court. This does not mean that the claim no longer exists. The claim is converted into an unenforceable natural obligation. The debtor can still redeem the claim in the following ways.
- By voluntary payment or payment “by mistake.”
- By offsetting against a debt to the debtor
A claim does not lapse automatically. The limitation period only commences when the debtor invokes it. If he forgets, the claim can still be collected in certain cases. One of these cases is an act of recognition. The debtor performs an act of recognition by making a payment arrangement or asking for a postponement. Even if he pays part of the claim, the debtor performs an act of recognition. In the act of recognition, the debtor cannot invoke limitation of the claim, even if the limitation period expired years ago.
When does the limitation period start?
The moment a claim becomes due and payable, the limitation period starts. The moment of claim ability is when the creditor can demand the performance of the claim. For example, the terms and conditions of a loan stipulate that a loan of €10,000, – will be repaid monthly in parts of €2,500, -. In that case, €2,500, – is due after one month. The total sum is not due if the installments and interest are paid neatly. Also, the limitation period does not yet apply to the principal sum. Once an installment date has passed, the installment becomes due and the limitation period for the relevant installment starts to run.
How long is the limitation period?
Statute of limitations after 20 years
The standard limitation period is 20 years after the claim arose or became due and payable. Some claims have a shorter limitation period, but even those claims are still subject to a 20-year period if they are established in a court judgment such as a court order.
Statute of limitations after five years
The following claims are subject to a 5-year limitation period (unless there is a judgment):
- A claim for performance of an agreement to give or do (e.g., a money loan).
- A claim for a periodic payment. You can think of payment of interest, rent, and wages or alimony. A separate limitation period starts to run for each payment period.
- A claim from undue payment. Suppose you accidentally made a giro payment to a stranger, the time limit begins from the moment you became aware of it and you also know the person of the recipient.
- A claim for payment of damages or agreed penalty. The five-year period runs from the day after the damage and the offender is known.
Statute of limitations after two years
A separate regulation applies to consumer purchases. A consumer purchase is a movable thing (something you can see and feel, but exceptionally electricity is also included) between a professional seller and a consumer (a buyer not acting in the exercise of a profession or business). Therefore, it does not include the supply of services, such as a course or order for garden maintenance, unless an item is also supplied.
Article 7:23 of the Civil Code (BW) stipulates that a buyer’s rights to repair or compensation lapse if he does not complain about it within a reasonable time after he discovers (or could have discovered) that the delivered good does not comply with the agreement. What constitutes a “reasonable time” depends on the circumstances, but a period of 2 months in a consumer purchase is reasonable. Subsequently, the buyer’s claims are time-barred two years after receipt of the complaint.
Note! This may also include a money loan taken out directly to purchase a tangible property by a consumer. For example, consider a credit agreement to buy a car for private use. As long as the installment is paid, the principal is not due. As soon as the principal is claimed for whatever reason, e.g. the debtor stops paying, a two-year limitation period starts to run.
The commencement of the limitation period
The limitation period does not start automatically. This means that the claim exists unchanged and can be collected. It is the debtor who must explicitly invoke the limitation period. Suppose he forgets to do so and still proceeds to perform an act of recognition, for example, by still paying a part of the debt, requesting a postponement, or agreeing on a payment schedule. In that case, he will no longer be able to invoke the limitation period later.
If the debtor makes a proper appeal to prescription, a claim can no longer lead to a court judgment. If there is a court judgment, then (after 20 years) it can no longer lead to execution by a bailiff. The judgment is then void.
A prescription is usually interrupted by the creditor giving the debtor notice to pay or otherwise comply with the agreement. Interruption is done by informing the creditor before the end of the limitation period that the claim still exists, for example, through a registered payment reminder or summons. However, the reminder or notice must meet several conditions to interrupt a limitation period. For instance, it must always be in writing and the creditor must unequivocally reserve his right to performance. If the debtor’s address is unknown, the interruption can be made via a public advertisement in a regional or national newspaper. Sometimes a claim can only be interrupted by filing a legal action, or proceedings have to be started shortly after the written interruption. It is advisable always to consult a lawyer in contract law when dealing with this complex matter.
Essentially, the creditor must be able to prove that the period has been interrupted if the debtor invokes the defense of prescription. If he has no proof, and the debtor thus gathers the limitation period, the claim can no longer be enforced.
A creditor can extend a limitation period when there is a general attachment of the debtor’s property due to bankruptcy. During that period, no one can have recourse against the debtor, so the legislator has stipulated that the limitation period cannot end during bankruptcy. However, after dissolution, the period continues again until six months after the end of bankruptcy if the limitation period ends during or within six months of bankruptcy. Creditors should pay close attention to letters from the trustee. He will send each creditor, provided they are registered in the bankruptcy, a notice that the bankruptcy has been dissolved.
A court ruling
For a claim established in a judgment, regardless of the statute of limitations, a 20-year period applies. But that term does not apply to an interest debt, which has been pronounced in addition to the order to pay the principal sum. Suppose someone is ordered to pay €1,000. He is also ordered to pay the statutory interest. The judgment can be enforced for 20 years. However, for the interest to be paid, the 5-year term applies. Therefore, if the judgment is not enforced until after ten years and no interruption has occurred, the interest for the first five years is time-barred. Note! Interruption is also subject to an exception. Usually, after interruption, a new term with the same duration will start again. This does not apply to the 20 years of a court judgment. If this term is interrupted just before the end of the 20 years, a new period of only five years starts to run.
For example, are you not sure if your claim against your debtor is time-barred? Do you need to find out whether your debt to your creditor is still claimable by the creditor due to a statute of limitations? Do not hesitate and contact our lawyers. We will be happy to help you further!