There are a number of instances where debts become historic and are no longer applicable. In some instances, debt collection agencies like Moorcroft Debt Recovery will chase you for debts that you’ve forgotten about. If you have a historic debt and are wondering whether it’s still live, this article is for you. In this blog post, you’ll learn:
- Which Time Limits apply to which debts
- When time limits start running on a debt
- Deal with creditors chasing you for old debts
- Deal with court action for debts past their limits.
Firstly, the Limitation Act 1980 was the first government legislation which sets out rules on the time period a creditor has in order to take action against you to recover the debt. Although the time limits are not applicable to all types of recovery action. The time limits also vary depending on which type of debt you’re facing. Limitation periods are very important to understand, especially if you’re being chased as it may transpire that you don’t need to pay the debt at all.
What Does Statute-Barred Mean?
The term Statute-Barred basically means that by law a creditor is no longer able to take action against you in order to make you pay back the debt. It doesn’t mean that it doesn’t exist anymore and in some cases, the creditor or debt collection agency can still take action to try to recover the money from you. It may also be referenced on your credit file and make it hard for you to attain credit in the future.
If you’re wondering, when can I use the Limitation Act? You have to think about which kind of debt you have. Read our breakdown of different types of debt for further understanding.
The limitation period begins at different stages depending on the type of debt you have. It’s important to know when the limited started. The Limitation Act, time begins to run after the Cause of Action. It’s not the same for all types of debt so make sure to find out which is applicable to your current situation. Here’s a quick overview of different types:
Unsecured Credit Debts
These are things such as credit cards, personal loans, catalogues and store cards. This is a simple contract debt.
The Limitation Act sets out that the limitation period for simple contract debts is six years and the cause of action for this kind of debt is ordinarily when the agreement states that the creditor can take court action due to late or ignored payments. This is often after one or two missed payments. In some instances debts won’t have a set repayment time frame and for these kinds of debts, deciding the cause of action is difficult. This type of debt will be statute-barred if the creditor hasn’t obtained a CCJ against you and you have not made a payment toward the debt amount over the last six years and you’ve not written to the creditor to admit that you owe the debt throughout the past six years. If you’re in this situation and are being contacted by a debt collection agency but you think the debt is statute-barred, get in touch with us and we’ll find out what the situation is and advise on the best course of action.
You could choose to ignore it and hope that it never appears again, but this is an unlikely scenario, it’s best to get in touch for expert advice!
The Financial Conduct Authority published a sourcebook which describes whether a debt is being collected fairly. The FCA doesn’t have the capacity to investigate individual complaints, although you can use their guidance in disputing a debt on the grounds of limitation. The rules apply no matter how old the debt is. Here are some of the key takeaways from the sourcebook:
“…a firm must not attempt to recover a statute barred debt in England, Wales or Northern Ireland if the lender or owner has not been in contact with the customer during the limitation period.” 7.15.4 Rule
“It is misleading for a firm to suggest or state that a customer may be the subject of court action for the sum of the statute barred debt when the firm knows, or reasonably ought to know, that the relevant limitation period has expired.” 7.15.7 Guidance
“A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred.” 7.15.8 Rule
There are a variety of other factors involved in deciphering what the situation is with your particular debt, so we always advise that if anyone has any questions, they get in touch with us to find out more.