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How long is a bad debt legally collectible?

If you have a bad debt then it is likely that the creditor will have pursued you for payment. This may be through letters or through the courts. However, what happens if you have a debt but you haven’t heard anything from the creditors? Are you still liable for that debt?

Our guide looks at the ‘Limitation Act’ and outlines how long various common bad debts are legally collectible.

The Limitation Act

If you have bad debts, creditors do have a limited period of time to take action against you. This means that they can’t pursue you for a debt if a certain amount of time has elapsed.

The Limitation Act is set out so that a creditor knows how long they have to take action against you for a debt. Action may include, for example, taking you to court.

There are different time periods for different kinds of debts, as we see next.

Bad unsecured debts

Unsecured debts are any debts that you did not provide security (or ‘collateral’ for). They include credit cards, unsecured personal loans, overdrafts, store cards and catalogue debts.

You may have had a debt with an ordinary creditor that has not contacted you for a while. However, just because you haven’t heard anything from the lender, don’t assume that the debt has been written off.

Even some months or years later, you may suddenly you receive a letter from your original creditor, or a debt collection agency asking you to make a payment. If this happens, you can argue that the creditor has run out of time and cannot take you to court for this debt.

The rules for this are:

  • The creditor has not already taken you to court

  • You have not made a payment for the debt in the last 6 years

  • You have not written to the creditor admitting you owe the debt during the last 6 years

Under the Limitation Act 1980 Section 5 ‘an action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued’.

In addition, the Office of Fair Trading say that under their Debt Collection Guidance on so-called ‘statute barred debt’ that ‘it is unfair to pursue the debt if the debtor has heard nothing from the creditor during the relevant limitation period’.

Creditors are not allowed to mislead you by saying the debt is still legally recoverable when it isn’t.

The six year rule also applies to Council Tax dates (from the date of the demand). And, if you have been ordered with a County Court Judgement for payment of a debt, you cannot use the Limitation Act to dispute the debt no matter how many years ago the creditor took you to court. However, the creditor may not be able to enforce the CJ without the court's permission, if the County Court Judgement is over six years old.

Debts to which the 6 year Limitation Act do not apply

There are some debts to which the Limitation Act does not apply. These include:

  • Student loans taken after 1998 –the rules say that repayments are directly taken from your wages or through your tax return. This means that the Student Loans Company are still allowed to take money from your wages for a loan over 6 years old and do not have to go to court to do so

  • Income tax and VAT – there are no limitations on income tax and VAT debts meaning you can always be pursued for this debt

  • Mortgage debt – if you still owe money from when your house was repossessed then the creditor can chase you for the debt for up to 12 years, rather than the normal 6

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