The time limit is usually six years for creditors to take legal action to claim money owed on unsecured debts such as, credit cards, personal loans, hire purchase agreements. While, as a general rule, there is a twelve year time limit on action to recover money owed on debts secured on land, such as mortgages or secured loans (although interest on mortgage arrears are subject to the six year rule).
The time limit runs from either the date when the money was first owed, or from the last time the debt was acknowledged, or from the last time a payment was made. In the case of joint debts, a payment made by one debtor will restart the time limit for both parties. Where one joint debtor merely acknowledges the debt, this will only start the time limit running for that debtor.
If you or someone acting on your behalf (for example a money advisor at the Citizens Advice Bureau, or a debt management company), contacts a creditor and acknowledges the debt within the six years, the six years will run from the date of the letter. This acknowledgment must be in writing and signed by the person making it or the person acting on your behalf.
Oral admissions will not suffice. Creditors will often tell our clients that the calls are being recorded. A transcript of a call is not evidence of acknowledgment of a debt. However, reference to telephone conversations in a subsequent letter signed by you or someone acting on your behalf could allow evidence of the conversation to be given in court, so that the letter and the conversation together could amount to an acknowledgement.
By stating that the debt exists but it is not your responsibility could amount to an acknowledgement if it is a joint debt. A part-payment on a joint debt would also amount to acknowledgment. The following could also amount to an acknowledgment:
If any kind of enforcement action is taken, the six year time limit will start running again. In cases where possession action has been taken, the creditor has twelve years from the date of the judgment to enforce the judgment.
We are aware of a number of companies pursuing statute barred debts. If you have received a letter from a creditor demanding payment on a debt you do not recognise, speak to one of our advisors. We will be able to investigate this without any form of acknowledgment on your behalf.
If you are in a debt management company or an individual voluntary arrangement, it is likely they would have started the six year time limit running again. However, this does not mean that we would not have a claim against the creditor if payment protection insurance has been sold, or we have a case to argue that the debt is unenforceable because the agreement fails to comply with the prescribed terms of the Consumer Credit Act 1974.
We offer free initial debt advice, so it won’t cost you anything to get advice on your agreements before entering into a debt plan.