How Long Can Debt Be Collected for?

October 17, 2014

Luke-Notley small (Custom)Although urban myths (usually surrounding student loan debts) suggesting debts can be dodged by moving out of the country for five years are almost always untrue – some debts can go out of date. If your creditor does not pursue an unsecured debt for six years or a secured debt for 12 years, the debtor may not be required to repay the debt.


Statute of Limitation

The Limitation Act 1980 provides a time scale which determines how long a debt can be pursued for by a creditor. This statute of limitation only applies when no acknowledgement of debt has been made between the debtor and the creditor for the set period of time. Furthermore, the law only applies to residents of England and Wales.

The ruling was developed to protect debtors against the possibility of creditors pursuing historical debts.

If there is no contact between the creditor and debtor for six years (or 12 years for secured debts such as mortgages) the debtor can claim the outstanding debt is statute barred under the aforementioned Limitation Act 1980. If the debt is statute barred, the creditor can no longer use the legal system to enforce repayments of the debt.

The creditor is still entitled to pursue the debt, just unable to use legal proceedings to do so.

The six year period (or 12 year for unsecured debts) begins when the two parties last acknowledged the debt or a payment was made.

Exempt Debts

Although the Limitation Act 1980 covers many forms of secured and unsecured debts, there are a few examples of debt which can still be pursued after the six year period. If the debtor has been taken to court by the creditor and a County Court Judgement has been granted, a Statute of Limitation would not stop the creditor from using legal proceedings to pursue the debts.

The HM Revenue and Customs are always entitled to pursue debts, regardless of periods without acknowledgement. This means that historical Income Tax and VAT debts will never go out of date and become subject to Limitation Act 1980. Additionally the Department of Work and Pensions (DWP) can legally pursue benefit overpayments for more than six years without going to court – the DWP are entitled to deduct the debt from current benefits.

How to Proceed After Six Years

If you have not received acknowledgement of a debt you owe for the required period for the debt to become statute barred, you do not need to contact the creditor. If the creditor contacts you after the debt becomes statute barred – simple reply in writing that you have no legal requirement to pay the debt.

Here is a template letter to send to any creditor pursuing a statute barred debt, informing them you have no intention of paying the debt.

It is worth noting that it is very rare for the Limitation Act 1980 to come into effect as few professional creditors would fail to acknowledge a debt for this length of time.

For more information about how to effectively manage your debt, contact the InControl team by calling the free helpline on 0800 072 6623 or visiting our homepage.