Expired Debt in SA: What You Need to Know

Have you ever been chased for money you owe from years ago? Or perhaps someone owes you money, and you are wondering how long you have to take legal action?

In South Africa, the law of prescription can make a big difference.

Prescription is essentially a legal time limit. If the applicable period expires without the debt being dealt with in a way recognised by law, the debt can be extinguished by prescription. But it is important to understand that there is no single “three-year rule” that applies to every debt.

The time period depends on the type of debt, when it became due, and whether prescription was interrupted or delayed.

WHAT DOES “PRESCRIPTION” MEAN?

Under the Prescription Act 68 of 1969, a debt can be extinguished by prescription once the applicable prescription period has passed.

For many ordinary debts, the period is three years. However, the Prescription Act provides different periods for certain types of debt, and other legislation can also prescribe different time limits.

This means that an old debt is not automatically prescribed simply because it is more than three years old. You need to establish what type of debt it is and whether anything happened that interrupted or delayed prescription.

HOW LONG DOES PRESCRIPTION TAKE?

The Prescription Act provides the following main periods:

3 YEARS – MOST ORDINARY DEBTS

Three years generally applies to debts for which no other prescription period is specifically provided by law.

This can include many ordinary contractual debts, such as unpaid invoices and certain consumer debts.

However, it would be incorrect to say that every credit card, personal loan, cellphone account, store account or other consumer debt automatically prescribes after exactly three years. The particular agreement, the legislation applying to it and the history of the account must be considered.

6 YEARS – CERTAIN NEGOTIABLE INSTRUMENTS AND NOTARIAL CONTRACTS

A six-year period applies to a debt arising from a bill of exchange, other negotiable instrument or a notarial contract, unless a longer period applies under the Prescription Act.

15 YEARS – CERTAIN DEBTS OWED TO THE STATE

A 15-year period applies to certain debts owed to the State arising from an advance or loan of money, or from the sale or lease of land by the State, unless a longer period applies.

30 YEARS – CERTAIN LONG-TERM DEBTS

A 30-year prescription period applies to certain debts, including:

So, for example, it is more accurate to refer to debts secured by a mortgage bond rather than simply saying that “home loans” all have a 30-year prescription period.

WHEN DOES THE PRESCRIPTION CLOCK START?

As a general rule, the prescription starts running when the debt becomes due.

There are important qualifications.

For certain debts, the law also considers whether the creditor knew the identity of the debtor and the facts from which the debt arose. A creditor can, however, be deemed to have that knowledge if it could reasonably have obtained it by exercising reasonable care.

There are also circumstances in which prescription can be delayed or postponed.

This is why simply counting three years from the date of an invoice, accident or agreement can sometimes produce the wrong answer.

CAN PRESCRIPTION BE INTERRUPTED?

Yes.

There are two important ways in which prescription can be interrupted under the Prescription Act.

1. ACKNOWLEDGMENT OF LIABILITY

The running of prescription can be interrupted if the debtor expressly or tacitly acknowledges liability for the debt.

When that happens, prescription generally starts running afresh from the date of the interruption.

This is why people should be careful about casually acknowledging an old debt before finding out whether it has prescribed.

A payment may, depending on the circumstances, amount to an acknowledgement of liability, but it is not legally accurate to say that every payment of R10 automatically resets every debt. Whether particular conduct amounts to an acknowledgement depends on the circumstances.

2. LEGAL PROCESS

Prescription can also be interrupted by serving the debtor with legal process in which the creditor claims payment of the debt.

This is commonly associated with legal proceedings such as a summons, but the Prescription Act defines “process” more broadly than simply saying “a summons from the Sheriff”.

There is also an important catch: the interruption can fall away if the creditor does not successfully prosecute the claim to final judgment, unless the debtor acknowledges liability or another applicable rule applies.

A telephone call, WhatsApp message or ordinary letter of demand should therefore not be treated as automatically interrupting prescription.

WHAT ABOUT PRESCRIBED CREDIT AGREEMENT DEBT?

There is additional protection for certain consumer debts covered by the National Credit Act.

Section 126B prohibits a person from selling a debt under a credit agreement to which the Act applies once that debt has been extinguished by prescription.

It also prohibits continuing to collect or attempting to reactivate such a prescribed debt in the circumstances set out in section 126B, including where the consumer raises, or would reasonably have raised, prescription as a defence.

This does not mean that every old debt is automatically covered by section 126B. The debt must fall within the relevant provisions of the National Credit Act and must actually have been extinguished by prescription.

ROAD ACCIDENT FUND CLAIMS HAVE THEIR OWN RULES

Claims against the Road Accident Fund (RAF) are governed by the Road Accident Fund Act and have specific prescription rules.

Where the identity of the driver or owner has been established, a claim under section 17 generally prescribes after three years from the date on which the cause of action arose, subject to the Act’s exceptions.

Where a claim has been lodged in accordance with the relevant provisions, the Act provides that it will not prescribe before five years from the date on which the cause of action arose.

There are also special provisions protecting minors and certain other persons.

For this reason, RAF claims should not simply be treated as ordinary three-year debts.

WORKPLACE INJURIES ARE DIFFERENT

Claims under the Compensation for Occupational Injuries and Diseases Act (COIDA) have their own statutory requirements.

Section 44 provides that a right to benefits under the Act can lapse if the accident is not brought to the attention of the Commissioner, employer or relevant mutual association within 12 months after the accident, subject to the provisions of the Act. (Department of Labour)

If you are injured at work, report the accident as soon as possible rather than waiting until the 12-month period is close to expiring.

CLAIMS AGAINST ORGANS OF STATE

If you intend suing an organ of state — for example, in an appropriate claim involving a government department, public hospital or the police — another important statutory requirement may apply.

The Institution of Legal Proceedings Against Certain Organs of State Act 40 of 2002 generally requires written notice of the intention to institute legal proceedings to be served on the relevant organ of state within six months from the date the debt became due.

However, this is not an absolute “miss six months and your case is automatically dead” rule. The Act allows a person, in appropriate circumstances, to apply to court for condonation of the failure to give the notice on time. The court must consider the requirements set out in the Act, including whether the debt has already prescribed.

WHAT SHOULD YOU DO IF A DEBT COLLECTOR CHASES YOU FOR AN OLD DEBT?

Don’t panic — but don’t blindly acknowledge the debt or make a payment either.

First, ask for enough information to establish:

If you believe the debt may have prescribed, obtain legal advice before acknowledging liability or making a payment.

This is particularly important because an acknowledgement of liability can interrupt prescription and cause the applicable period to start running afresh.

WHAT IF SOMEONE OWES YOU MONEY?

The same principle applies from the creditor’s side: don’t sit on your rights.

If you are owed money, establish the applicable prescription period and when it started running. If necessary, obtain legal advice and take appropriate legal steps before prescription expires.

Do not assume that repeatedly sending emails, WhatsApp messages or letters of demand will stop prescription. The Prescription Act specifically provides for interruption through acknowledgement of liability and judicial process, subject to its requirements.

THE BOTTOM LINE

Prescription can protect debtors from being pursued indefinitely, but it can also cause creditors to lose the ability to enforce a debt if they wait too long.

The biggest mistake is assuming that “three years = every debt is prescribed.”

South African prescription law depends on the type of debt, when it became due, applicable legislation, whether the debtor acknowledged liability, whether legal process was served, and whether any circumstances delayed or interrupted prescription.

If you are being chased for an old debt, don’t simply pay under pressure. Find out whether the debt has actually prescribed.

And if someone owes you money, don’t wait until the deadline is upon you. Once prescription becomes an issue, the difference between acting in time and acting too late can be financially significant.

When in doubt about an old debt, get proper legal advice before taking action.

Need Help Fighting Prescription? We Can Help!

Our team of experts can assess your situation and determine if your claim is still valid. We can also assist you in claiming your debt before it’s too late. Contact us! Don’t let your money disappear – fight for what’s rightfully yours.