Legal Definitions - acknowledgment of debt

An acknowledgment of debt occurs when a person who owes money (the debtor) clearly admits or recognizes that a specific debt exists and that they are responsible for it. This admission can be made in writing, verbally, or sometimes through actions.

This legal concept is significant because it can "interrupt the running of prescription," which is another term for the statute of limitations. Essentially, if a certain amount of time has passed during which a creditor could have legally pursued collection of a debt, an acknowledgment of that debt by the debtor can reset or pause that time limit. This provides the creditor with a renewed period to take legal action to recover the money owed.

Here are a few examples to illustrate this concept:

• Example 1: Written Communication

  Imagine Sarah borrowed $1,000 from her friend Mark two years ago. The statute of limitations for collecting such a debt might be three years. Two and a half years after the loan, Sarah sends Mark a text message stating, "Hey Mark, I haven't forgotten about the $1,000 I owe you. My finances are tight right now, but I promise to start paying you back next quarter."

  How it illustrates the term: Sarah's text message is a clear, written acknowledgment of the existing $1,000 debt and her responsibility to repay it. This act could reset the statute of limitations, giving Mark more time to legally pursue the debt if Sarah fails to pay as promised.

• Example 2: Partial Payment

  Consider a small business owner, David, who owes a supplier $5,000 for materials. After a period of financial difficulty, David hasn't made a payment in over a year. Just before the statute of limitations is about to expire, David sends the supplier a check for $100, along with a note saying, "A small payment towards my outstanding balance."

  How it illustrates the term: By making a partial payment, David implicitly acknowledges the larger outstanding debt. This action, even for a small amount, can be considered an acknowledgment of debt, potentially restarting the clock on the statute of limitations for the remaining $4,900.

• Example 3: Verbal Promise

  Suppose a former client, Emily, owes her accountant, Robert, $750 for services rendered a few years ago. During a casual phone call, Robert mentions the old invoice. Emily responds, "Oh yes, I remember that. I've been meaning to get that paid. I'll send you a check next week."

  How it illustrates the term: Emily's verbal statement directly recognizes the existence of the $750 debt and her intention to pay it. This verbal promise serves as an acknowledgment of debt, which could prevent the statute of limitations from expiring and allow Robert more time to collect the payment if Emily doesn't follow through.