The Limitation Act 1980 is a section of UK law that outlines how long a creditor (the individual or business you owe money to) can take legal action against you for an unpaid debt.
Aside from debt, it also provides guidance on various other areas of the law, from personal injury claims to criminal fines. This can make it difficult to know which rules apply to you.
But don’t worry, we’ve put together a useful guide highlighting everything you need to know about the Limitation Act 1980 – without all the complex legal jargon.
What is the Limitation Act 1980?
The Limitation Act 1980 outlines the ordinary time limits within which creditors can take legal action against debtors for outstanding debts.
Under the Limitation Act 1980, most debts have a time limit or ‘limitation period’ of six years. This simply means a creditor has six years to start legal proceedings against you for an unpaid debt before the money becomes unenforceable or ‘statute barred.
However, while most debts are subject to the standard six-year limitation period, there are some exceptions.
How long is the limitation period for each type of debt?
The limitation period differs depending on the type of debt and can range from six to 20 years.
Here is a quick guide to the limitation period for each type of debt:
Unsecured debt
Unsecured debt, which is debt not linked to an asset or backed by collateral, has a time limit of six years.
This means a creditor can’t seize any of your assets, such as your home or car, in the event you can’t pay.
Examples of unsecured debts include:
- Credit cards
- Personal loans
- Payday loans
- Utility bills
- Store cards
- Overdrafts
Council tax debt
Council tax debt, which is one of the most common types of debt in the UK, has a limitation period of six years.
However, it’s worth noting that local authorities are usually very quick to take legal action against unpaid council tax and will very rarely ignore it until it becomes statute barred.
Typically, a local council will apply to the court for a County Court Judgment (CCJ) after a couple of missed payments and, if you still don’t pay, may request that the money be taken directly from your wages or benefits.
Benefits overpayments
The Department for Work and Pensions (DWP) is responsible for calculating benefits and while payments are usually accurate, mistakes can happen.
For example, if you don’t let the DWP know of a change in your circumstances, you can be paid more than you are entitled to, leaving you in debt to the DWP.
Benefits overpayments have a limitation period of six years but like local councils, the DWP will rarely ignore debt for six years and will usually recover the money by taking it directly from future benefits payments.
County Court Judgments (CCJs)
If you fail to make repayments towards a debt or come to an agreement over how to settle the debt, your creditor may apply for a CCJ, which is a court order demanding you repay what you owe.
Once a CCJ has been issued, the debt will no longer be covered by the Limitation Act 1980 and there will be no time limit for recovering the money.
This means your creditor has an unlimited length of time to start legal proceedings against you and will be free to take further action, such as sending bailiffs to your home or making you bankrupt if you still don’t pay.
However, if the CCJ is more than six years old, the creditor may need to re-apply to the court for permission to enforce the judgment.
Income tax and VAT
Like CCJs, debts owed to HM Revenue & Customs, such as income tax and VAT, have no time limit and can be chased indefinitely.
This means that HMRC will continue to pursue you until you have repaid the full amount you owe and, if you still don’t pay, may deduct the money directly from your wages or seize your possessions.
Because HMRC debts are classed as priority debts, there can also be serious consequences for ignoring them, including late fees, bailiff action, and, in some cases, prison.
Mortgage shortfalls
If you miss several mortgage payments, your mortgage lender may start the process of repossessing your home, which is when they take legal ownership of the property and sell it to recover the debt.
However, if the sale of the property doesn’t make enough money to cover the debt, you will be chased for the remaining amount or the ‘mortgage shortfall’.
Mortgage shortfalls have a limitation period of 12 years while the interest on the debt has a limitation period of six years.
When does the limitation period start?
The limitation period starts to run from the date a ’cause of action’ accrued or, in other words, the earliest date your creditor could have taken action against the debt. This includes when you last admitted to owing the debt or made a payment towards the debt.
However, even if you’re confident you haven’t made a payment towards the debt in six years, it’s worth taking a look at every fact relevant to this information as you may have admitted to owing the debt without realising.
Here is a guide to help you determine when limitation periods start:
When you last admitted to owing the debt
The limitation period will start from the last time you wrote to the creditor and admitted to owing the debt in writing (including text or email). For joint debts, written acknowledgement only counts for the individual who signed the letter or email.
This doesn’t include a letter you wrote to the creditor admitting you don’t owe the debt, a letter the creditor sent to you, or a verbal conversation you had with the creditor over the phone.
Remember, the limitation period can restart at any point. So, even if you ignore a debt for five and a half years, admitting to owing it will set the timer back to the beginning again and you will have to wait another six years for it to become statute barred.
When you last made a payment towards the debt
The limitation period can also start from the date you last made a payment towards the debt, no matter how small the contribution was. This is why you should always carry out reasonable diligence to confirm a debt is not only valid but yours to pay before making a payment towards it.
This includes a payment made by a debt management company on your behalf or, for joint joints, payment made by either person listed on the account.
Again, the limitation period will restart each time you make a payment towards the debt, whether this is £1 or £100.
What happens after the limitation period ends?
When the limitation period ends, the debt will officially become statute barred and your creditor can no longer take legal action to get you to repay it.
However, it’s important to remember that whilst you can’t be taken to court, the debt still exists and your creditor can still take further action to get you to repay what you owe. This could involve instructing debt collection agents to collect the debt on their behalf.
Most creditors will stop pursuing you for payment once they know they know legal action is no longer an option, but this isn’t always the case so it’s important to know what to expect.
Can the primary limitation period be extended?
The limitation period on a debt starts when a cause of action accrues and ends when the limitation period for that debt expires (as long as the debt hasn’t been acknowledged or paid in that time).
However, if a debtor has committed fraud or deliberately concealed wrongdoing, for limitation purposes, the time limit won’t begin until after the creditor has discovered the misconduct.
Similarly, if you’re in the Debt Respite Scheme (Breathing Space), which offers temporary protection from your debts, your creditors can’t contact you and the limitation period will be automatically extended.
Can I still be made to pay a statute barred debt?
As previously mentioned, while your creditor can’t take legal action against a statute barred debt, they can still use other methods to get you to pay.
This may involve discussing Alternative Dispute Resolution (ADR) options with you, which are solutions designed to help you reach an agreement without going to court.
Remember, even if you are confident the debt is statute barred, you must never admit to owing the money as this can encourage your creditor to continue chasing you for payment.
What should I do if I’m still being contacted about a statute barred debt?
If a creditor has got in touch demanding payment for a statute barred debt, there are a few things you must remember.
First, you must never admit to owing the money because, even if the limitation period has ended, your creditor can still try other debt collection tactics.
Second, you are not legally required to pay a debt if a creditor contacts you about it after it has become statute barred. They may threaten you with court action, but if you have confirmed the debt is statute barred, they have no legal grounds to force you to pay.
Lastly, if you believe a creditor is harassing, bullying, or pressuring you into paying a statute barred debt, you can write to them and ask them to stop contacting you or, if that doesn’t work, make a formal complaint.
Should I ignore a debt until it becomes statute barred?
The idea of ignoring a debt until it becomes statute barred can be appealing – especially if you haven’t acknowledged the debt in over five years and the debt is on the brink of becoming statute barred.
However, this can be a risky move and is likely to be a very stressful time for you.
Usually, a creditor will try everything in their power to get you to repay what you owe before the option of legal action is taken away from them. This can mean constant visits, calls, and letters, and, in some cases, harassment in an attempt to bully or pressure you into repaying the debt.
During this time, you may also receive a CCJ claim form in the post which will mean your creditor has gone to the court to force you to pay and the debt will never become statute barred.
Furthermore, ignoring a CCJ will only cause further damage to your credit rating, which can make it difficult to be approved for further credit for several years. This can make the idea of a mortgage, bank account, or even a phone contract an impossibility until the debt has been repaid.
Remember, if you’re being chased for an unpaid CCJ or money owed to HMRC, the debt will never become statute barred. There are various debt solutions that can help you repay what you owe, freeze interest, and stop creditor contact so you can regain control of your finances and look forward to a debt-free future.
What should I do if I dispute the debt?
Sometimes, a creditor can make a mistake and you could be asked to pay more than you think you owe or a debt you don’t believe you owe.
However, this is a rare occurrence and before a defendant claims they shouldn’t repay a debt, they must confirm they definitely don’t owe the money.
Here is a guide to what you should do if you don’t think you should pay a debt:
If you are being asked to pay the wrong amount
If you are being asked to pay a different amount than what you believe you owe, you should ask the creditor for a complete breakdown of the debt.
For debts covered by the Consumer Credit Act, you have a right to be supplied with a full statement outlining each individual charge, including any interest payments, that might explain why the total balance is higher than expected.
If you are still confident the amount is wrong and the creditor refuses to correct the balance, you can make a complaint.
If you don’t believe you owe the money
If you are being asked to pay a debt you don’t think you owe, you must carry out a few simple checks to confirm the money definitely isn’t yours to pay.
For example, consider whether it could be an old debt you’ve forgotten about or a debt that has been transferred to a debt collection company you don’t recognise.
Sometimes, a creditor can wait until the last minute to collect a debt they are owed and, by this time, you may have forgotten all about it.
Conclusion
The Limitation Act 1980 outlines how long a creditor can take legal action against a debtor for an unpaid debt before it becomes statute barred.
This information can help you know what your options are for dealing with unpaid debts and what action your creditor is likely to take to get you to pay.
For example, while credit card debt becomes statute barred after six years, your mortgage lender can take you to court over mortgage arrears for up to 12 years.
When a debt becomes statute barred, your creditor can no longer take legal action to force you to pay it, but it won’t be written off completely. They may still try to recover the money through other means, such as a debt collection agency.
Although this article provides helpful information about the legal time limits for unpaid debts, it does not constitute legal advice. Always seek further help and advice if you’re struggling with unaffordable debt or dealing with an issue related to information outlined in the Limitation Act 1980.
