Published in Debt Advice Features on Friday, March 30 2007

In 1980 the Limitation Act was introduced by the government in order to determine how long creditors can chase debtors for an unpaid debt. The Act applies only to residents of England and Wales. If no contact has been made between the creditor and debtor within a stipulated time limit, it may mean the creditor may no longer chase the debt using the legal system to force repayment.

The type of debt determines the length of time a debt may be chased. For unsecured debts this time limit is six years. The recovery of unsecured debts and any interest on them must commence within six years of the original agreement date. If a debtor makes a payment within the six years or acknowledges the debt through writing, the six year limitation period starts again from the date of the payment or of the letter of acknowledgement.

If it is the case that the creditor does not contact the debtor in the six year period, then the debtor may allege that the debt is Statue Barred as stipulated in the conditions of the Limitation Act. If the debt becomes Statute Barred, this means the creditor may no longer make use of the legal system to force repayment of the debt.

There are certain cases where the creditor can pursue an unsecured debt indefinitely. For example, although a debtor may not have received correspondence from a creditor, this does not mean the debt has been written off. This may simply be due to the debtor moving address and not notifying the creditor of this. The debt will therefore still exist. However, if a creditor has been sending letters to a debtor but they have not been sent to the correct address, the conditions of the Limitation Act still remain intact.

Creditors will retain the right to chase an unsecured debt indefinitely if: there is a CCJ against the debt (even after the six year limitation period a creditor can get permission from the court to chase the debt), a payment has been made within the last six years or contact has been made between the debtor and creditor via telephone, email or in writing. If the reason for the contact is to deny existence of the debt then this is considered as an exception.

Once the six year limitation period has elapsed and a debt is Statute Barred, if a creditor continues to pursue the debtor for a debt even when they have stated they do not intend to pay the debt, then the debtor can claim harassment as stipulated in the Administration of Justice Act 1970.