In the UK, there is a limit to how long creditors (the individuals or companies you owe money to) have to take legal action against an unpaid debt – known as the ‘limitation period’ or ‘statute of limitations’. Put simply, if a creditor doesn’t take legal action against an unpaid debt within a certain time, they will lose the legal right to do so.
Most debts can be chased for up to six years before they become unenforceable by law or ‘statute barred’. The limitation period can also be reset if you acknowledge the debt in writing or make a payment towards it at any point during this time.
How long can you legally be chased for outstanding debts?
The Limitation Act (1980) states that most unsecured debts can be chased for six years. This means that, as long as the debt hasn’t been paid or acknowledged in six years, your creditor will lose the right to take legal action to force you to pay it.
When the limitation period expires, the debt officially becomes statute barred – meaning the law (statute) can be used to prevent (bar) your creditor from seeking a court judgment or court order to recover it.
However, while the statute of limitations will protect you from legal action, it won’t make the debt disappear and your creditor may still contact you to ask for payment or hire a debt collection agency to encourage you to pay.
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What are the exceptions to the six-year limitation period?
Most unsecured debts, including personal loans, utility bills, payday loans, and credit cards, can be chased for up to six years, but there are some exceptions to this rule:
Mortgage shortfalls
The limitation period for mortgage shortfalls is not as straightforward as it is for other debts. For example, if your home is repossessed but the sale didn’t raise enough to cover your mortgage debt, your lender can chase you for the remaining amount – known as the ‘mortgage shortfall’.
Once the limitation period starts running – which is usually after two or three missed payments – your lender has 12 years to chase you for the capital (original amount borrowed) and six years to chase you for the added interest.
Income tax, VAT, and capital gains tax debts
There is no limitation period for any debts owed to HM Revenue & Customs (HMRC), including income tax, VAT, and capital gains tax.
This means that HMRC can chase you for money owed indefinitely – even if the debt is decades old or you didn’t even know it existed.
County Court Judgments
The Limitation Act (1980) no longer applies to debts that have been issued with a County Court Judgment (CCJ). So if your creditor has issued you with a court order over an unpaid debt, they will be free to chase you for the money owed indefinitely.
However, if the CCJ is over six years old and your creditor has yet to enforce it, they may need to seek permission from the court before they can take action.
How long can council tax arrears be chased for?
According to the Limitation Act (1980), council tax is subject to the same six-year limitation period as other unsecured debts.
However, local councils tend to act quickly when it comes to unpaid council tax and will usually serve you with a ‘liability order’ after a couple of missed payments. This is a legal demand for payment that gives them the power to forcibly take the money owed from your wages or benefits before you can access it.
There is no time limit for enforcing a liability order, but local councils can only apply if it’s been less than six years since the unpaid council tax was originally due.
How long can benefit overpayments be chased for?
The Limitation Act (1980) states that the limitation period for benefits overpayments and social fund loans is six years.
However, the Department for Work and Pensions (DWP) will usually try to recover the money owed immediately by reducing future benefits payments or deducting a set amount every month until the debt has been repaid.
Even if the overpayment was due to a DWP error or system failure, you’ll still be expected to return 100% of the money.
When does the limitation period begin?
Some people believe the limitation period starts from the date the credit agreement is signed, but this isn’t quite true. The limitation period begins from the ’cause of action’ or, in other words, the point at which the creditor could have first taken legal action over the unpaid debt.
The limitation period can also begin from the date you last made a payment towards the debt or admitted to owing the money. So if you were to contact your creditor about a debt you falsely assumed was statute barred, the timer would be reset and you’d have to wait another six years for it to become statute barred.
Here is a quick guide to help you understand when the limitation period on a debt begins:
When you last made a payment towards the debt
The date of your last payment towards the debt – by yourself or someone else if it’s a joint debt – will count as the beginning of the limitation period.
This is the case regardless of whether the payment was as little as £1 or as much as £100 and includes any payments made by a third party, such as a debt company or financial advisor, on your behalf.
When you last admitted to owing the debt
The date you last admitted to owing the debt in writing – manually or electronically – will also count as the beginning of the limitation period.
This includes any signatures from a third party but, in the case of joint debts, the acknowledgement only counts for the individual that referenced the debt in writing.
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How do I know if a debt is statute barred?
Even if you are confident you know when the limitation period started, it can be difficult to know for certain whether a debt has officially become statute barred.
Generally, an unsecured debt will be statute barred as long as you didn’t contact the creditor in writing, pay some or all of what you owe, or receive notice of legal action within the last six years. This can be checked by looking at your credit file or bank statement.
Alternatively, you can find out if a debt is statute barred by simply asking your creditor over the phone. Even if the debt isn’t statute barred, you have the right to ask for proof that you paid or acknowledged the debt within the last six years and what date the action occurred.
Remember, contacting your creditor in writing will count as you acknowledging the debt and can reset the limitation period.
What happens to a debt once it becomes statute barred?
Once a debt becomes statute barred, your creditor will no longer be able to take legal action to force you to repay it. The debt will still exist and your creditor can still try to get you to pay it another way (e.g. by hiring debt collectors to chase you on their behalf) but they will have run out of time to take you to court over it.
The only way a debt won’t become statute barred is if your creditor takes legal action before the limitation period expires. Even if they only get as far as applying for a court order, taking the first step is enough to prevent the debt from becoming statute barred.
Although there is no legal obligation to pay a statute barred debt and you can’t be taken to court for non-payment, you can still choose to repay it if you wish. This can allow you to settle your debts for good and put a stop to your creditor contacting or harassing you for payment.
Will statute barred debt affect my credit rating?
While statute barred debt won’t affect your credit rating, the missed payments or defaults that led to you getting into debt in the first place will be visible on your credit file for six years.
Because a default notice stays on your credit record for six years, it will usually be removed around the same time the debt becomes statute barred.
However, the six-year limitation period is not the same as the six years that a debt remains visible on your credit file and just because a debt isn’t showing on your credit file, it doesn’t necessarily mean it’s statute barred.
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Should I wait for a debt to become statute barred?
Simply waiting for a debt to become statute barred can be tempting – especially if you know you’re nearing the end of the limitation period and your creditor isn’t actively chasing you for the money owed.
However, most creditors will try their hardest to recover what they’re owed before the limitation period expires and the option of legal action is taken away from them. This could involve threatening phone calls, letters, and visits to your home or business which, over time, can take a serious toll on your mental health.
Remember, your creditor can take legal action against you up until the date the limitation period on the debt expires. So even if your creditor hasn’t contacted you about an unpaid payday loan in over five and a half years, you’re still at risk of legal action until a total of six years have passed.
Can debts be chased for longer than 10 years?
The thought of being chased for a debt for more than 10 years can be daunting, but thankfully, most debts become statute barred long before this.
For example, the only debts that can legally be chased for longer than 10 years are mortgage arrears (12 years), debts owed to HMRC (indefinitely), and CCJs (indefinitely).
However, it’s worth noting that it’s rare for creditors to wait up to 10 years before taking legal action against an unpaid debt and, in most cases, you’ll be served with a court order asking you to repay what you owe after only a few missed payments.
What should I do if I’m being chased for statute barred debts?
Even if a debt is statute barred, you may still regularly receive letters, phone calls, and emails from your creditor asking you to repay what you owe.
When this happens, you should inform them that the limitation period on the debt has expired and politely request that they stop asking for payment.
However, if your creditor continues to contact or harass you about the money owed, you can make a direct complaint or report them to the Financial Ombudsman Service (FOS).
Similarly, if a debt collector is threatening you with legal action over a statute barred debt, it’s worth remembering that they have the same legal rights as your creditor. This means that they have no legal grounds to force you to pay and can’t take you to court over the money owed – despite what they claim.
Can I be sent to prison over an unpaid debt?
Being in debt can be extremely stressful and it’s normal to fear the worst, whether it’s your home being repossessed, your assets being seized, or being sent to prison.
However, being in debt is not a criminal offence and you can’t be sent to prison for simply failing to pay a debt. The only time you could be sent to prison over an unpaid debt is if you repeatedly fail to follow a court order, like a CCJ, or purposely commit fraud to try and get out of repaying what you owe.
Even for serious or priority debts, like criminal fines, business rates, and child maintenance arrears, prison will only be considered as a last resort if you’ve refused to pay the debt on several occasions and your creditor has exhausted every other option to try and recover some or all of the money owed.
Conclusion
The limitation period is the length of time a creditor has to take legal action to get you to repay a debt before it becomes statute barred. For most unsecured or simple contract debts, this is six years.
Knowing whether a debt is statute barred can help you gain a better understanding of your financial situation and, more importantly, know whether you’re at risk of legal action. This can be done by checking your credit report or bank statement or asking your creditor over the phone.
Remember, never contact your creditor in writing to find out if a debt is statute barred. This can be classed as you acknowledging the debt and, for most unsecured debts, will mean you’ll have to wait another six years until the debt becomes statute barred and you’re protected from legal action.
