Limitation Act and Unsecured Debts - Free Advice and Help

The 1980 Limitation Act 1980 states how long a creditor can chase someone for an unpaid debt. This articles explains how the limitation act applies to unsecured lending in England and Wales.

The Limitation Act 1980 applies only when no contact has been made between the creditor and debtor within a certain time limit, and applies to residents of England and Wales only.

The time limit depends on the type of debt. For unsecured loans it is 6 years. If the debtor acknowledges the debt in writing or pays an installment within the original limitation period, then the time limit begins again from the date of acknowledgement or the date of payment.

If the creditor does not contact the debtor for 6 years or more, the debtor may be able to claim that the outstanding debt is Statute Barred under the conditions of the Limitations Act. Statute Barred means the creditor cannot use the legal system to enforce payment.

When a Creditor can pursue an unsecured debt.

A debtor may think (or hope) a creditor has written-off a debt if they have not heard from them for a long time. This may be because of failure to tell the creditor of address changes. The debt still exists and creditors are entitled to chase payment indefinitely.

Creditors can pursue an unsecured debt if:

There is a CCJ outstanding against the debt.
Payment to the account has been made within the past 6 years. This includes from other people named on the credit agreement.
Contact has been made with any party named on the credit agreement. This can be by telephone, letter or email in order to request a balance or change details. An exception to this is contact for reasons to deny the debt exists.

If a creditor continues to chase a debtor when the debt is Statute Barred and the debtor has stated intention not to pay the debt, they may be able to claim harassment contrary to section 40 (1) of the Administration of Justice Act 1970.

County Court Judgments

If the creditor has previously taken the debtor to court and a CCJ has been awarded, the debtor will not be able to use the Limitations Act 1980 to dispute the debt. If the CCJ is over 6 years old, the creditor will need the permission of the Court to enforce the debt.

What to do if a creditor contacts you after 6 years or over.

Don't admit to owing the debt. Once you acknowledge the debt (in writing) you are required to pay the debt back. If part payment is made, even after a 6-year gap, the Limitations Act 1980 won't be enforceable and the debt will have to be paid back.

If a creditor, who you haven't had any communication with for 6 years contacts you about a debt, write to them quoting the Limitation Act 1980, without acknowledging the debt.

If you are being asked to repay a debt you consider to be statue barred, then you can used the following template letter to respond.

WITHOUT PREJUDICE

Dear Sir/Madam

Re: Account No/Reference No:

No debt is acknowledged to you. You have contacted me regarding the account with the above reference number, which you claim is owed by myself.

I would point out that under the Limitation Act 1980 Section 5 “an action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.”.

The last payment or acknowledgement of this debt was made over six years ago and no further acknowledgement or payment has been made since that time. Unless you can provide evidence of payment or written acknowledgment from me in the relevant period under Section 5 of the Limitation Act, I suggest that you are no longer able to take any court action against me to recover the alleged amount claimed. Any such action WILL be defended and challenged on the above grounds.

I await your written confirmation that no further contact will be made concerning the above account and confirmation that this matter is now closed. If you do not supply such confirmation, I will be making a complaint to the Financial Services Ombudsman. Also, continuing to press for payment after a debtor has stated that they will not be paying a debt because it is statute barred could amount to harassment contrary to section 40 (1) of the Administration of Justice Act 1970 .

I look forward to your reply.

Yours faithfully

(Your signature)

What To Do Next

Need more advice? Please call us for FREE advice or submit the form on the left of this page.

We can help you if you have multiple debts and are not able to afford repayments.

Can We Help? Want To Know More?

If you would like us to call you back with some specific advice or more details about our debt solutions then please enter your details below.