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Statute barred debt

Some debts cannot be recovered as they are “statute barred” under the terms of the Limitation Act 1980, which sets time limits in which legal action can be taken to recover a debt.

If the time limit for the debt in question under the Limitation Act has expired, this will mean that a Creditor cannot bring legal proceedings against you to recover it. This does not mean that a Creditor cannot pursue you for the debt by writing to you; however it does mean that if payment for such a debt is requested, you can refuse to do so.

The time limit for recovery of most debts is six years. However, this can vary depending upon what type of debt is owed; specifically whether it is secured against your home or unsecured.

Unsecured debts include credit card debt, personal loans, store cards, catalogues and any borrowings which are not secured either against your property or another asset.

Unsecured debts will become statute barred if:

  • You have not heard anything from a creditor within a 6 year period of the debt first becoming payable
  • You have not acknowledged that the debt is due within this period in writing, in person or over the telephone
  • Your creditor has not issued Court proceedings and obtained a CCJ against you in relation to the debt during the six year period– any County Court Judgment can be enforced for a period of six years from when it is obtained, and this time limit can be extended under limited circumstances

If a debt is statute barred, you should write to your Creditor to inform them that you do not intend to repay the debt as limitation has expired. If the creditor continues to pursue you for the debt once you have done so, you can inform the Office of Fair Trading or Trading Standards, who can take action in the event of creditor harassment.

The OFT in particular sets out guidelines which protect you from creditor harassment. Creditors who continue to press for payment or mislead you to believe that legal action can still be taken once a debt is statute barred may be engaged in “unfair practice”. If creditors do not comply with OFT, they risk losing their licence and in effect can be put out of business.

In the case of secured debts such as mortgage shortfalls; has a period of 12 years to take legal action for repayment in the event that a property is sold for a lower value than the amount owed under the terms of your mortgage.

Call our specialist debt team on 08000 915 004 to find out how we could help you.