Recovering debt is a complicated process, so it is extremely useful to know whether you are under a time limit when attempting to regain any monies owed.
The Limitation Act 1980
The Limitation Act 1980 is the act responsible for outlining any time limits around which a creditor can collect money from a debtor. The Act applies to England and Wales and only applies where no contact has been made between the two parties within the stated time limited. The period of time specified under the act starts from the “cause of action” which varies between types of debt.
Unsecured debts, such as car loans or personal loans that are not secured against a property, have a time limit of six years. During that time, the creditor can pursue the debt through the normal processes, including using an enforcement agency (like Able Investigations) to collect the debts. The debt can be pursued after the six year period if there has been a county court judgement (CCJ), a payment has been made into the account within the last six years (for unsecured debts) or there an acknowledgement of the debt in writing and signed by the party in debt.
Mortgage shortfalls have a time limit but this is longer than other debts under the Act – twelve years. This means if you sell your home or it is repossessed and there is money outstanding on the mortgage, the company can pursue the debt for twelve years before the terms of the Act will apply.
If a debt is barred by statute, this means that the time has run out under the law, such as the Limitation Act. Once the time has run out, the debt is classed as statute barred and creditors cannot force the debtor to pay the money. However, even if a debt is a statute barred, it can still be placed on a credit reference file and a debt collection agency can attempt to collect the money from the debtor.