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If you’re in debt, you may be wondering how long your creditors have to pursue the debt.
The answer is governed by the Limitation Act 1980, which sets out the time limits for taking legal action on debts.
In general, creditors have six years to take action on most types of debt, although there are some exceptions.
If you’re struggling with debt, it’s important to understand your rights and limitations under the law.
In this article, we’ll explain more about the Limitation Act 1980 and what it means for your debts.
The Limitation Act 1980 is a law that limits the amount of time creditors have to seek payment for debts owed to them.
This act is vital for protecting the rights of debtors. After a certain amount of time, it’s unfair to pursue individuals over historic debts. Alongside legislation like the Consumer Protection Act, the Limitation Act protects consumers against predatory practices.
In most cases, the Limitation Act sets debts as having a mandatory recovery time limit of six years in England and Wales, which helps protect consumers from being pressured into paying debts years after they have been incurred.
Although debts are still owed after the six years have passed, the creditor will no longer be able to pursue debt repayment through any legal means.
Generally speaking, the limitation period is six years from the date an agreement to pay the debt is broken, or from when the debt was last acknowledged by the debtor.
This can differ depending on the type of debt, however.
For example, rent arrears will have a shorter limitation period so it’s important to keep up to date with any changes that affect your particular debt case.
As previously mentioned, most debts have a time limit of six years for recovery under the Limitation Act, but certain debts are treated differently.
Below are the limitation periods for some of the most common types of consumer debt.
Unsecured debt is among the most common forms of debt in the UK. It includes debts like credit card debt, store cards, payday loans, and unpaid utility bills.
Even if a creditor doesn’t try to contact you about an unsecured debt, the debt still exists.
However, after 6 years from the last known payment or admittance of owning the debt, legal proceedings cannot be started by the creditor.
If you have been taken to court by a creditor and have received a County Court Judgment, the Limitation Act 1980 will no longer apply to your debt.
This means that the creditors can take action at any time and there is no getting around the debt if a judge has issued you with a CCJ.
However, if the judgment is more than 6 years old, permission from the court might be necessary for the creditor to enforce payment.
If you owe money to the council and other debt collection methods have failed, the council can ask for an attachment of earnings from the Court.
This allows the council to take money directly from your wages or benefits payment before you receive it.
If the council hasn’t contacted you about this debt in 6 years, however, then it’s unlikely the council will grant their attachment of earnings request.
That said, it’s also unlikely that a council will wait until the 6 year primary limitation period to act.
The local authority usually obtains a liability order before this time limit expires.
A mortgage shortfall is the remainder of your debt after your property has been repossessed and sold by your lender.
For example, if you owed £100,000 on your mortgage and the house was only able to be sold for £60,000, then the mortgage company would chase you for the remaining £40,000 which is considered the ‘shortfall’.
The Limitation Act dictates that lenders have more time to collect this money than other types of creditors — the limitation period for a mortgage is 12 years.
If you owe money to HM Revenue and Customs (HMRC), the limitation period isn’t in fact relevant; HMRC can pursue you for those debts indefinitely until such times as they have the money secured.
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‘Statute-barred’ is the name given to a debt that is more than six years old, meaning six years have passed since there was any contact from creditors regarding the debt.
This six year period is known as the ‘ordinary time limit’ and is legally enforced in most countries.
Any attempt by a creditor to recover a statute barred debt can be challenged in court as it has either been fully paid off or it is beyond the six-year limit for collection of debts.
Outstanding debts can be an unwelcome burden but creditors will not be able to begin legal proceedings over a debt that is outside of the limitation period, as it will be considered statute barred.
The legal statute provides rules and deadlines by which outstanding debts must be paid by, and creditors may need to cease debt recovery after this point.
A creditor cannot commence proceedings (such as court action) if the outstanding debt is past its limitation period.
If legal action arises after six years, you are entitled to cite the Limitation Act in your defence.
If a creditor contacts you about a debt that is over six years old, don’t be alarmed.
According to the Limitation Act 1980, which protects consumers from false claims being made by creditors for debts more than six years old, it’s likely that you are lawfully relieved of your obligation to pay the debt.
No contact from the creditor in those six years should suggest that the debt has expired and is no longer valid, however you can write a letter to the creditor reaffirming this fact just to make sure.
If they persist in asking for payments from you where applicable, make sure you quote the Limitation Act 1980 as a reminder.
While ordinary time limits for most debts are around the six-year mark, there are some exceptions to the rules underpinned by the Limitation Act, such as if the debtor has moved address or if interest has been added to the debt.
Another exception to the Limitation Act involves concealment of information about the debt in question.
If a debtor attempts to hide information related to their debt from a creditor, in order to wait it out until the limitation period on the debt has passed, and that hidden information is later discovered, then the limitation period is applied differently.
The court has ruled that, in cases like these, the limitation period on the debt will come into effect from the date the relevant information was discovered by the debtor, or “could with reasonable diligence have been discovered”.
If you think a creditor may be trying to claim a debt from you that is outside of the limitation period, you can send them a claim form known as a ‘letter of claim’ asking for proof that the debt is still valid.
If they are unable to provide this proof, then they will not be able to take any further action against you and you will not have to pay the debt.
If you owe debts to creditors and aren’t sure of your rights, we can help. IVA Plan is a UK specialist in debt advice and debt solutions, and can give you the information you need to make an informed decision. To get debt help today, get in touch with us today.
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