How Long Does It Take to Erase a Debt?

If you struggle with heavy debts, you may naturally wonder if you will ever clear them. Legal solutions are available to help reduce your financial burden, but what does “erasing debt” mean? In reality, debt erasure refers to the length of time this information remains on your credit report. In this article, learn how long debt can stay on a credit report and how it can hurt your credit and impact your financial future.

Limitation Period for Debts in Quebec

A limitation period is the period after which a creditor can no longer legally claim a debt. In Quebec, the law specifies that a creditor can consider a debt prescribed after three years from the date of the last acknowledgment or activity related to it. This means that if a creditor has taken no legal action and you have not acknowledged the debt in any way (such as making a payment, providing a written promise, or using the account), the creditor loses the right to sue you and validly claim the debt.

For example, if you have credit card debt that you have not used and on which you have made no payments for more than three years, and the credit card company has not pursued legal action, the debt can no longer be legally claimed. In practice, some debt collectors may still attempt to recover the amounts of debt, but they are also bound by limitation periods.

However, it is important to know that the debt is not automatically removed from your credit report once it has expired. Certain information may still be retained by credit reporting agencies even after the limitation period has passed. As a result, an expired debt may continue to affect your credit score for several years.

Personal Bankruptcy

Personal bankruptcy is a legal solution that can eliminate most unsecured debts, but it has a significant impact on your credit score. When someone declares bankruptcy, the information remains on their credit report for 6 to 7 years, depending on the province or territory (7 years in Quebec, Ontario, and Newfoundland and Labrador). If a person declares bankruptcy more than once, the record can remain on file for up to 14 years.

As Mathieu Roy points out in an article in L’actualité: “Bankruptcy is not something to be taken lightly. It stays on their credit report for six or seven years.” Bankruptcy is indeed a major decision, and its consequences can weigh heavily on your financial future. However, for some people, it represents the only option to get a fresh start and put an end to creditor pressure or debt collection efforts.

Consumer Proposal

Considered as an alternative to bankruptcy, a consumer proposal via a Licensed Insolvency Trustee allows you to negotiate with your creditors to repay part of your debts through fixed monthly payments.

Once accepted, the proposal becomes a legally binding agreement that requires you to make regular payments to your creditors according to the agreed terms. This solution offers the advantage of having negative entries removed from your credit report 3 years after the completion of the proposal.

It is important to note that the duration and impact of a consumer proposal may vary depending on the type of debt involved and the specific agreement reached with your creditors.

How to Deal With Outstanding Debts?

Debts don’t disappear overnight. Even when a debt has expired or has been settled, it can still carry financial consequences. Certain types of debt, such as tax debt or student loans, are subject to specific rules that differ from general consumer debts.

Relying solely on time to eliminate a debt is risky. Taking proactive steps is the best way to avoid the long-term impact of unpaid debt. Solutions such as debt consolidation loans, working with a debt settlement company, or even using home equity to reduce the amount of money you owe may be considered depending on your situation. 

Consulting a Licensed Insolvency Trustee can also help you explore the best debt relief strategy. They will carefully assess your situation and guide you through different options to pay off debt efficiently.
Becoming debt-free is a process that requires both time and informed financial decisions. Seeking the right support to manage your debt is often the most effective way to regain peace of mind. Avoid managing your financial challenges by yourself. Contact our team of professionals at M. Roy & Associés for solutions tailored to your situation.