After landing themselves in debt, many UK residents have a difficult time getting out of it. As months pass, they wonder if they will ever be free of this financial burden. Some have no hope of repaying the money they owe, which leads them to alternate resolutions. Others wonder whether there is a statute of limitations that will eventually cause their debts to disappear. The answer to that question is yes but there are some exceptions.
The Limitations Act 1980 specifies the time limit within which creditors can pursue the repayment of outstanding debts. It applies to residents of Wales and England and the effects vary based on the type of debt. The law stipulates that if a creditor does not maintain contact with a debtor for a minimum of six years from the time that the debtor last made payment or admitted to owing the money, unsecured credit card and loan balances may be considered statute barred.
Though the money is still owed, the creditor may not take legal action to collect debt that is classified as statute barred. The creditor is also prohibited from misleading the debtor into believing that this debt is still recoverable under the law, in an attempt to solicit payment. If the debtor states that the money will not be repaid, the creditor should not exert pressure regarding repayment because this may be considered harassment, which is prohibited by the Administration of Justice Act 1970.
Be Prepared To Know At Least (Some) Of The Legalities
If the debtor makes a payment or written acknowledgement of the debt within the six-year period, the timeframe is reset from the date this is made. Scottish law differs and the Prescription and Limitation (Scotland) Act 1973 is the main regulation applying to debt repayment. Under this law, recovery action may be prohibited if the lender permits five years to pass without receiving payment from the borrower. In this case, the debt is extinguished completely and may not be enforced.
Unless they want to repay their debts, individuals are advised to ignore letters from collectors regarding old debts nearing the end of the statute of limitations. They should not contact the collector or the creditor it represents and they should not acknowledge the debt. Many collection agencies play on the lack of knowledge of consumers, trying to recoup money just before the limitations period ends.
Some collectors even go as far as requesting repayment of statute barred debts. This is permitted but taking court action or requesting an order for repayment is not. While this may sound like a relief to many people, realize that the debt can be repeatedly reregistered on the credit file, causing problems if additional credit is sought in the future.
There are also caveats to the law that consumers should understand. If there is an outstanding County Court Judgment (CCJ) for the debt, the debtor may not invoke the statute of limitations as a dispute that the debt is owed. At the same time, the creditor may need court permission to enforce a CCJ that is more than six years old.