What is a statute-barred debt?
If a debt is barred under statute, it means that the creditor has run out of time to use certain types of action to try and make you pay the debt.
Statute barred does not mean the debt no longer exists. The creditor or a debt collection agency may still try to recover money from you. The debt may still be on your credit reference file.
What is the limitation period?
The Limitation Act 1980 says how long a creditor has to take certain actions against you to recover a debt. This is called the limitation period. The limitation period only applies to some types of recovery action. Limitation periods vary depending on the type of debt.
When can I use the Limitation Act?
This depends upon the type of debt you have. We cover the main types of debt here.
When does the limitation period start?
The limitation period starts to run from the ‘cause of action’. This varies in different types of debt. In this summary, we look at the cause of action for the main types of debt.
The limitation period may be reset and start again if you do certain things. For example, this might include sending a letter which says you owe the debt or making a payment. The rules on this are complicated. Get advice from us before you contact your creditors or if you think you may have already reset the limitation period.
Unsecured credit debts
Unsecured credit debts are things like credit cards, store cards and personal loans. These debts are often called simple contract debts.
- The limitation period for simple contract debts is six years.
- The cause of action (when the limitation period starts) is usually when your agreement says the creditor can take court action against you.
Council tax
The limitation period for getting a liability order to collect council tax is six years. The cause of action is when the council first sent a bill to you.
Mortgage shortfalls
A mortgage shortfall can happen if your home is repossessed, and the sale did not raise enough money to pay what you owe on the mortgage.
The limitation period for mortgage shortfalls is twelve years for capital owed, and six years for the interest part of the shortfall.
The cause of action is usually after two or three missed mortgage payments.
Income tax and VAT
There is no time limit for recovery of tax, duty, or any related interest. National Insurance is not a tax and is subject to a six-year limitation period.
Benefit overpayments and social fund loans
The limitation period for benefit overpayments and social fund loans is six years. The cause of action for benefit overpayments is when a final decision is made on the overpayment. For social fund loans, the cause of action is when the loan is due for repayment.
Student loans
The limitation period for student loans is six years. The cause of action depends on if you took out your student loan before or after September 1998.
Child Support Agency (CSA) and the Child Maintenance Service (CMS)
If you owe money to the CSA or the CMS, the limitation rules can be complicated. Contact us for advice.
County court judgments
Once a creditor has a county court judgment (CCJ) for a debt, the Limitation Act does not put any time limits on how long they have to enforce that judgment. But if your CCJ is more than six years old, you may be able to argue that it would not be fair for enforcement to happen. The rules about this can be complicated, so get help.
Bankruptcy
If a creditor has a county court judgment (CCJ) against you, there is no limitation period to make you bankrupt. If there is no CCJ, there is a six-year limitation period.
