Know when your debt prescribes

As a general rule, prescription occurs when a debtor’s liability to pay a specific debt is extinguished as a result of the passing of a prescribed time period. As soon as a debt prescribes, a debtor is no longer under any obligation to pay it.

It is still legal for the creditor to demand payment or even sue for a prescribed debt. The debtor will then, however, be able to raise the defence of prescription. It is for this reason, that debtors need to be aware of prescription – to protect themselves from debts they are no longer liable for. On the other hand, creditors must also be cognizant to pursue claims timeously.

The Prescription Act prescribes the time periods after which specific debts prescribe. Most civil claims prescribe after 3 years. There are however various exceptions hereto, but only a few is listed below:

  • Debts relating to negotiable instruments prescribe after 6 years.
  • Judgment debts, debts secured by mortgaged bonds and debts owed to the state, for example, prescribe after 30 years.

When does prescription start to run?

The abovementioned prescriptive periods start to run as soon as the debt is due. When the debt is “due” will depend on when the identity of the debtor is known and when the facts from which the debt arises are known to the claimant. Importantly, prescription will start running irrespective of whether the creditor is aware of his/her rights.

Can the prescriptive time period be delayed?

The prescription period can be delayed in certain circumstances in terms of the Prescription Act. A few examples include when the debtor is outside of South Africa, the creditor is a minor, or the debt is the object of a dispute in arbitration. Such a restriction will stop on, after, or within one year before the normal prescription period will end. If the latter happens, one year will be added after the date on which the restriction stopped.

The running of prescription will be interrupted by an acknowledgement of debt by the debtor and/or a summons being served by the creditor on the debtor, claiming performance in terms of the debt.

An acknowledgement of debt can take various forms and may be written or verbal. It is however advisable that creditors should reduce acknowledgements of debt to writing, because of its evidentiary value.

Conclusion

A debtor should not be burdened by a debt indefinity, especially since costs and interest will be added to the outstanding debt.

A creditor also benefits from the sense of urgency created by prescription, in that the recovery of his/her debt will be quicker.

Whether a debt is due by you or owed to you, it would be advisable to consult with your attorney to determine the best way forward.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)