How long do I have to pursue a debt?
If you are owed money, then one of the options in recovering that money is to take the debtor to court to get a Judgment against them so they have to pay the monies owed. There are strict time limits on how long you have to do this and this blog sets out what those time limits are and how they affect your ability to recover monies owed.
England Wales and Northern Ireland. If a creditor wants to take someone to court because they owe them money they have 6 years from the date the debt became due to take that person to court otherwise the debt becomes unenforceable or what is known as statute barred. This is governed by the Limitation Act 1980. It does not mean the debt disappears it still exists but you are barred by law from getting a Court Order or Judgment forcing that person to pay the debt. They can still take other action depending on the type of debt. This does not apply to Scotland which has its own rules.
The 6-year time limit applies to most debts such as invoices, credit, store cards, personal loans, gas and electric arrears, council tax arrears, benefit overpayments, rent arrears and overdrafts. There are some exceptions and these include;
- Mortgage shortfalls have a longer limitation period of 12 years for the money you owe to the lender but the interest on that mortgage still has the 6-year limitation period. That means they only have 6 years to obtain a Judgment for the interest but up to 12 years for the actual capital balance on the mortgage that is owed.
- Personal injury claims only have a 3-year limitation period so you would have to bring the claim within those 3 years.
- Income tax, vat and capital gains tax debts to HMRC do not have a limitation period which means HMRC can take you to court on these debts no matters how many years have passed.
When does the limitation period begin?
The limitation period starts when one of the following happens;
- The last time the person who owes the debt wrote to the creditor acknowledging they owed that debt or
- The last time they made a payment on that debt or
- The earliest date the creditor could have started court action. For example, if the creditor issued an invoice and said that has to be paid within 30 days and payment was not received then the limitation period would start at the end of that 30-day period.
If the debt was in joint names then it is important to note that if only one of the joint debtors wrote to the creditor acknowledging that they had the debt then that acknowledgement for the purposes of the 6-year time limit only relates to the person who wrote the letter, not the other joint debtor.
We have found in the past that specifically with matters such as council tax the local authority will sometimes try and make demands for council tax payments going back beyond 6 years. Section 9 of the Limitation Act 1980 allows the local authority to take action up to 6 years from the date they became aware the debt was due (the date they issues the demand notice) but if they do not issue a summons within that 6 year period then although they can still chase a debtor for the money they cannot actually enforce that debt. That is also supported by regulation 34 of the Council Tax (Administration and Enforcement Regulations 1992) Act.
If you have any further enquiries concerning limitation please do not hesitate to contact us or email email@example.com