How long can a debt be collected in Ontario?

Understanding the duration of debt collection in Ontario is crucial to managing your financial health and knowing your rights. Let’s answer: How long can a debt be collected in Ontario?
Bruce Hodges
November 20, 2023
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Table of Contents

How long can a debt be collected in Ontario?

Debt can often feel like a looming cloud over our financial wellbeing, particularly when it pertains to the length of time it can be pursued by creditors. In Ontario, there are specific rules and limitations that govern the collection processes for debt. As a personal finance expert at Parachute, I’m here to guide you through understanding how long a debt can be collected in Ontario.

Key Takeaways:

  • The basic limitation period for debt collection in Ontario is 2 years.
  • The limitation period can be reset or extended in certain circumstances.
  • There are many options for debt relief in Ontario, such as debt consolidation, which can help you reduce monthly payments and provide immediate relief.

What is the Limitation Period for Debt Collection in Ontario?

In Ontario, the Limitations Act of 2002 generally sets the basic limitation period at two years for debt collection. 

This means that after a debtor has defaulted on a payment, a creditor or collection agency has two years from that date to initiate legal action to collect the debt. This timeframe is critical because if the limitation period expires, the debt cannot be enforced through the court system.

However, it's essential to note that the limitation period can reset or be extended in certain circumstances. For example, if you make a partial payment towards the debt or acknowledge the debt in writing, the two-year period may start anew. Thus, it's important to understand how your actions can affect the statute of limitations.

What Happens After the Limitation Period Expires?

Once the two-year period expires without any action from the creditor, they cannot take legal action to force you to pay the debt. However, this doesn't mean the debt simply vanishes. The debt may still exist, and you may continue to receive calls or letters from collection agencies. But these agencies no longer have the legal authority to compel payment through the courts.

Protecting Your Rights and Credit Score

Even when debts are old, they can still impact your credit score negatively. Hence, it's important to manage any outstanding debts proactively. At Parachute, we believe in not only helping you consolidate your existing debt but also in leaving your financial health in a better state than when you began. We offer cashback on your debt consolidation loan if you maintain good financial habits, helping to boost your financial wellness.

By consolidating at our lower interest rates, our customers save an average of $300 per month. And remember, at the end of your consolidation term with us, you should witness improved cash flow, better interest rates on future loans, and a great credit score.

What Are Debt Relief Options in Ontario?

If you’re currently struggling with debt in Ontario and wondering when and how it’s going to end, it’s important to learn about your options. There are many debt relief options that can help you move forward towards financial freedom. Let’s evaluate a couple of the more prominent options for Ontarians.

Consumer Proposal

A consumer proposal is a formal debt settlement option regulated by the Bankruptcy and Insolvency Act. It is an agreement between an individual and their creditors, facilitated by a Licensed Insolvency Trustee (LIT). The proposal outlines a structured plan for repaying a portion of the total debts, often with reduced interest and extended timelines. It provides an alternative to bankruptcy, allowing individuals to avoid the severe consequences of insolvency while addressing financial challenges. 

A consumer proposal may be considered when facing overwhelming unsecured debts, experiencing difficulty making regular payments, and seeking a more manageable path to debt resolution. It offers legal protection from creditors, allowing individuals to restructure their debts and work towards financial stability while avoiding the full impact of bankruptcy on their credit and assets.

Debt Consolidation

Debt consolidation is a good option for those who want to make their monthly payments more manageable, and avoid some of the harsher consequences related with consumer proposals.

A debt consolidation loan in Ontario involves combining multiple debts into a single loan, often with more favourable terms such as a lower interest rate or extended repayment period. It is a useful option for individuals managing various high-interest debts. 

When considering a debt consolidation loan, you should assess their total debt, interest rates, and their ability to make a single monthly payment. This approach simplifies financial management, potentially reduces the overall cost of debt, and provides a structured plan for repayment. Debt consolidation loans are particularly beneficial for those seeking a streamlined approach to debt management and are committed to responsible financial habits to avoid accruing new debts.

How to Deal With Debt Collection & Legal Action

If you’re struggling with debt collectors calls and/or unable to pay your bills, it’s important not to ignore the problem. Taking proactive steps, staying informed, and seeking professional guidance can help navigate the complexities of debt collection and legal proceedings.

Here are our top tips for handling this difficult situation:

  • Communicate openly with creditors and debt collectors, seeking to negotiate manageable repayment plans or settlements. 
  • Keep a record of all communications and agreements in writing. 
  • Consider debt consolidation to reduce your overall interest rates and streamline your finances.
  • If facing legal action, consider seeking legal advice to understand your options and potential defenses. 

If you’re unable to pay your debt, consulting with a Licensed Insolvency Trustee can provide insights into debt resolution strategies, including the possibility of a consumer proposal or bankruptcy.


Understanding the duration of debt collection in Ontario is crucial to managing your financial health and knowing your rights. Remember, a debt collector may continue to contact you even after the limitation period expires, but they cannot enforce the debt through legal means. If you're struggling with high-interest debt, consider Parachute as your ally. We focus on getting you out of predatory debt cycles and setting you on a path towards financial stability.

Apply to see if you’re a fit today.

Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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