How Long After the Last Payment Was Made On a Debt Does the Creditor Have to Start a Lawsuit For the Balance Owing?
Generally, When a Debtor Makes a Payment Towards a Balance Owing, the Payment Is Deemed As An Acknowledgement of Debt and the Time Limit Within Which to Sue For the Balance Is Extended. An Acknowledgement of Debt May Also Be Sufficient to Extend the Time Limit.
Understanding When Acknowledgement of Debt Restarts the Limitations Clock Subject to Certain Conditions
Creditors, whether as a bank, a private lender, or a business running accounts, generally know the law regarding the two-year time limit within which a lawsuit for a debt must be initiated after payment goes into default. Often unknown is the law about how the two-year time limit may be reset.
The Limitations Act, 2002, S.O. 2002, Chapter 24, Schedule B, provides a two-year period within which litigation must be commenced following discovery that a lawsuit is an appropriate means to resolve a dispute. Additionally, the Limitations Act, 2002 also provides for a reset of the two-year limit, thereby providing a fresh two-year period, after a debtor makes a payment prior to expiry of the two-year limit. Specifically, the Limitations Act, 2002 says:
Basic limitation period
4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
5 (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
13 (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.
Interestingly, per section 13 of the Limitations Act, 2002, the two-year time limit is restarted by an acknowledgement of a debt. With this said, what constitutes an acknowledgement is often disputed.
Restarts Upon Payment
When a person makes a payment on a debt, the law deems that the payment is an acknowledgement of the debt; and accordingly, the two-year period for bringing a lawsuit on the outstanding amount of the debt restarts with a fresh two-year period. This principle was stated in the case of Neumann v. Hussein et al, 2012 ONSC 5130 where it was said:
 Pursuant to s. 13 of the Act, a payment on account in respect of a liquidated claim starts the clock in respect of a limitation period. With every payment, a debtor acknowledges or re-acknowledges his or her liability sufficient to restart the running of the two-year limitation period: ABC Lumber Ltd. v. Bodrenok, 2010 ONSC 769, 89 C.L.R. (3d) 140 at para. 39.
Acknowledgement of Amount Is Unrequired
Another interesting point applicable to limitations law is that the acknowledgement of a debt is without a requirement to acknowledge the amount of the debt; and accordingly, a debtor may simply agree that a debt is owing and such may be sufficient to restart the limitations clock. This lack of need to acknowledge the amount of the debt was expressed in the case of Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 by the Court of Appeal.
Acknowledgement Involves More Than An Offer-to-Settle
Additionally, the Middleton case also addressed the issue of whether an offer-to-settle a dispute is an acknowledgement of debt sufficient to restart the limitations clock. Specifically, in Middleton the Court of Appeal said:
 We do not accept the motion judge’s statement that to stand as an acknowledgment, the letter and Release would, “at a minimum, have to demonstrate and confirm the amount of the debt that remained owing”. That said, we agree with his conclusion that the letter and unsigned Release, even when read in light of the share purchase agreement, did not constitute a clear and unequivocal acknowledgement of the debt claimed, with a proposal to satisfy it, as opposed to a mere offer to settle a claim, without acknowledging that $412,500 or indeed any amount remained owing in respect of the promissory note.
Acknowledgement Must Be Written With Signature
A further interesting point and potential issue of concern is that for the limitations clock to restart, the acknowledgement of debt must be in writing and must be signed; however, the terms writing and signed are interpreted quite broadly whereas an email message or text message is deemed as an acknowledgement in writing and the unique digital identifier is deemed as an authentic, and valid, signature. The requirements that an acknowledgement be in writing with signature is prescribed in the Limitations Act, 2002 and were explained in the case of 1475182 Ontario Inc. o/a Edges Contracting v. Ghotbi, 2021 ONSC 3477 where it was said:
 There is no question that the purported acknowledgment here was in writing. The question is whether it was signed.
 The trial judge based his conclusion on the authenticity of the June 2, 2016 text messages, citing in support of that conclusion the case of Lev v. Serebrennikov, 2016 ONSC 2093. There, Patillo J., sitting as a single judge of the Divisional Court, considered whether an email, with the debtor’s name on it, could satisfy the requirements of s. 13 of the Act. He found that it could, saying “the issue in every case will be one of fact concerning authenticity.” (Para. 24).
 I agree that the signature requirement of s. 13(10) is grounded in concerns about authenticity. But the plain wording of the section cannot simply be ignored, in my view, even if the court is satisfied about authenticity by a means other than a signature.
 The world is changing. Everyone knows that. We live in a digital world now, much more than was the case when the Act came into force in 2002. It is incumbent upon the court to consider not just traditional means of affixing one’s signature to a document, but other, more modern means, including digital signatures.
 In this instance, there is no question about the authenticity of the text messages. There is no question that Dr. Ghotbi was the author of the June 2, 2016 texts in issue. From that perspective, the underlying purpose of s. 13(10) has been satisfied.
 I would also find that the express requirement of a signature is met in this case. Dr. Ghotbi used his cellular telephone to send and receive texts with Mr. Lupo. Dr. Ghotbi, like all other cellular telephone users, has a unique phone number linked with his phone. In fact, there will undoubtedly be other unique identifiers associated with Dr. Ghotbi’s phone including, without limitation, an International Mobile Equipment Identifier (IMEI) number. These unique identifiers provide, in effect, a digital signature on every message sent by the user of that particular device. Again, there is no dispute that the user of the device was Dr. Ghotbi and that he sent the texts in issue. In my view, that digital signature is sufficient to meet the requirements of s. 13(10) of the Act.
Unable to Revive Following Expiry
As a final interesting note, on an issue that is often confused by creditors and even legal practitioners, is that once a limitation period expires, an acknowledgement, including acknowledgement by payment, fails to revive and restart the limitation period. This principle was very succinctly stated by the Court of Appeal in the case of Michel v. Spirit Financial Inc., 2020 ONCA 398 where it was stated:
 The difficulty here is that the limitation period had already expired for these loans when the partial payments were made and could not be revived. See Cross Bridges Inc. v. Z-Teca Foods Inc., 2016 ONCA 27, at para. 10: “for an acknowledgement to reset the limitation clock, it must be made before the expiry of the limitation period applicable to the claim”. The first repayment made to Michel, was more than a year too late for even the most recent of the five loans to be saved from the statute bar.
When a debtor makes a payment or acknowledges a debt in writing and with a signature, including by email or text message, the two year limitation period within which the creditor must start a lawsuit is reset; however, if a payment or acknowledgement occurs after the two-year limitation period expires, the payment or acknowledgement fails to revive the right to sue.