The Statute of Limitations (also known as the Limitation Act 1980) laid down the foundation and time limits in which a creditor must pursue a debtor for their debt.
It defined the limitation period for all types of debt after which court action against a debtor by a creditor would not be possible.
Today, we’ll be discussing how the statute of limitations could affect any debt you may have.
What does the Limitation Act 1980 Say About Unsecured Debts?
For unsecured debts (also known as simple contracts), the limitation period is clearly stated to be six years.
This is clearly stated in Section 5 of the Act:
“An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.”
“The date on which the cause of action accrued” states to the date on which the creditor would have the right to sue you with court action. For most types of unsecured debts, this date would be the date on which you are sent a Default Notice.
Hence, the limitation period would start once you’re sent a default notice. After that, you have to fulfill all conditions for six years in order for your limitation period to be completed.
Conditions for Limitation Period to be Valid
- You haven’t made a payment towards your debt in six years. If it’s a joint debt, then your debt partner must not have made a payment towards the debt either.
- You (or your partner in the case of joint debt) have not acknowledged your debt in writing in the past six years.
- Your creditor has not taken out a County Court Judgment (CCJ) against you.
If all these conditions are fulfilled and it has been six years since your default notice, then your debt would become statute-barred.
When your debt is statute-barred, according to the Limitation Act 1980, your creditor cannot pursue you in court in order to recover the debt.
What Other Time Limits have been Defined in the Limitation Act? Can I be Chased for Debt After 10 Years?
Whether you’ll be being chased for your debts after 10 years depends entirely on what type of debt it is and what are the circumstances surrounding the debt.
The Limitation Act 1980 set the foundation through which a judgment is made about whether or not a debt is enforceable.
As I mentioned earlier, the limitation period for most types of debts is six years. This includes credit cards or store card loans, utility arrears, personal loans, payday loans, benefit overpayments, catalogues, overdrafts as well as council tax arrears.
That being said, there are definitely some exceptions which the Act outlines thoroughly as well.
Some of these are as follows:
Mortgage shortfalls have a limitation period of 12 years for the amount of money (the “capital”) that you borrowed. Keep in mind that the limitation period for the interest on your mortgage is still six years.
Personal Injury Claims
The limitation period for personal injury claims is a much shorter three years.
Other Types of Debts
Certain types of debts such as income tax debt, VAT and capital gains tax debts do not have any type of time limit or limitation period. This would mean that HM Revenue and Customs holds the right to take you to court for your debts even after many years.
County Court Judgment (CCJ)
As mentioned before, if your creditor takes out a County Court Judgment (CCJ) against you, then no matter what type of debt it is, it cannot become statute-barred. There’s no time limit on a debt that has a CCJ taken out against it.
Criminal Fines have no limitation period, i.e., you could be pursued for any debts you may have in regards to your criminal fines even after many years.
According to the Statute of Limitations, What can a Creditor do once a Debt is Statute-Barred?
The Statute of Limitations clearly states that once a debt becomes statute-barred, a creditor cannot pursue you in court for it.
Keep in mind that while this does clearly mean that you won’t be pursued in court for it, it still means that your creditor may contact you outside of court regarding your statute-barred debt.
If your creditor is regulated by the Financial Conduct Authority, you can use this to your advantage.
FCA guidelines clearly state that it is unfair for a creditor to be contacting you for a statute-barred debt.
Thus, if a creditor is contacting you and you’re sure that the debt they’re asking about is statute-barred, then you should tell them this.
Write them a letter informing them that the debt is statute-barred and you do not intend on making payments towards it. You should also request them to state in writing that they will not be contacting you in regards to the statute-barred debt again.
This should get them to stop. If it doesn’t, you can report them to the FCA.
If your creditor is not regulated by the FCA, then there’s not much you can do. Your best option would be to make arrangements to pay back the debt in order to get your creditors to stop contacting you.
If you cannot afford to pay your debt, then I suggest contacting an independent debt charity for advice such as StepChange.
What are Some Things I Should be Aware of in Regards to Statute-Barred Debt?
The most important thing you must keep in mind is that you should not depend on these laws to get out of your debt.
There’s a very low chance that your creditors will let your debt become statute-barred. For example, it’s extremely unlikely that your local council isn’t going to pursue you for council tax debt for six whole years. Thus, you should always communicate with your creditors and do your best to get your debts paid.
Ignoring your debts in hopes that they will become statute-barred may land you in more trouble than you were initially in.
If you keep ignoring your debts, the chances of it becoming statute-barred are fairly slim. However, the chances of your creditor taking out a CCJ against you are quite high.
Another thing to always be wary of is to identify what type of debt you have and ensure you know the correct limitation period for it. You may be wrongfully thinking that your limitation period is six years whereas it could be 12 years.
Lastly, you must also keep in mind that certain creditors don’t even need to go to court in order to extract money from you. For example, HM Revenue and Customs can take money from your wages and benefits as payment for your debts.
In the end, I just have to say that it can be highly beneficial for you to go through the Limitation Act of 1980.
It can give you great insight into how long your debt can be enforced and what your rights are.