The Limitation Act 1980 is a section of UK law that sets out rules for how long someone can take legal action to recover money they are owed.
The Limitation Act relates to many areas of law – from personal injury claims right through to debt. Because of this, researching how the Act relates to the money you owe can sometimes feel very difficult.
To make things easier, we’ve put together a guide that explains everything you need to know.
We’ll explain how the Limitation Act 1980 works, how it relates to different types of debt, and some other information that’s useful to know if you have debts that you haven’t dealt with for a long time.
What is the Limitation Act 1980?
The Limitation Act is an Act of Parliament that applies in England and Wales. It is usually written with ‘1980’ at the end because this is when it was approved to become part of the law.
In legal speak, it’s known as a ‘statute of limitations’. “Statute” means a written law, and “Limitations” means a restriction – so in simple terms, it’s a limit to how long the certain laws can be applied for.
When it comes to debt, the Limitation Act gives time limits for your creditors (people you owe money to) to chase their debtors (people they have loaned money to).
Most of the time, this limit is 6 years – but there are some exceptions to this.
How do these time limits work?
Each time limit begins when the debtor last made a payment or admitted owing the money.
So, if you last made a personal loan payment 3 years ago and you haven’t admitted to the creditor that you owe money since then, the limitation period will come to an end in another 3 years.
When these time limits run out, the debt is still owed – but the Limitation Act 1980 says that it cannot be enforced by law. This means the creditor usually can no longer take you to court to recover the money. This also usually means they cannot practically get the money back, so they consider the debt to be lost.
It’s important to remember that ignoring a debt through the limitation period doesn’t stop debt collection proceedings. At any stage through this six year period the creditor could ask the court to order you to pay the money back – and that could be followed by bailiff action if you don’t.
What happens after the relevant limitation period is up?
When the limitation period comes to an end, the debt becomes ‘statute barred‘.
Again, this is a legal term – but it really just means that the debt is no longer covered by the law.
“Statute barred” doesn’t mean the debt disappears – it just means that the company’s legal capacity for recovering the debt has run out. This will usually mean that the company writes the money off – although some companies will continue to chase the debt anyway.
How long is the limitation period for debt?
For most debts, the Limitation Act says court action can be taken to recover a debt for up to 6 years.
However, there’s a different limitation period (time limit) for different debts.
You can take a look at the different statutory limitation periods for different types of debt here:
Unsecured debt
An unsecured debt is one that isn’t tied to anything you own. Examples include:
- Credit card debt
- Personal loans
- Payday loans
- Overdrafts
- Store cards
Creditors sometimes cannot get in touch with you about this kind of debt if you fail to let them know you’ve moved house or changed your name.
Even if you don’t hear from a creditor, the debt still exists. However, after 6 years from the last payment or last time you admit that you owe the debt the creditor cannot start legal proceedings.
County Court Judgment
If a creditor has taken you to court and you have received a County Court Judgment forcing you to repay the debt, the Limitation Act 1980 no longer applies.
This means there is no time limit and no getting around a debt with the Limitation Act if a judge has issued you with a CCJ.
However, if the judgment is more than 6 years old, the creditor might need the permission of the court to enforce the debt.
Council Tax
If you owe council tax and no other debt collection methods have worked, the council can ask for a liability order from the Court. This lets the council take money directly from your wages or benefits payment before the money gets to you.
If the council you owe money to hasn’t done this in 6 years, the Limitation Act 1980 means the Court will refuse their application to make this kind of ‘attachment of earnings‘.
However, it’s very unlikely that a council will have left it this long to act. Usually, the local authority will have obtained a liability order well before the 6 year primary limitation period is up.
Mortgage shortfalls
A mortgage shortfall is something that can happen after your property has been repossessed by your mortgage lender. If the property is sold but the amount it sells for doesn’t cover the full mortgage debt, then you will be chased for the ‘shortfall’.
The Limitation Act says mortgage lenders have longer than other creditors to chase the money they’re owed. Therefore, the limitation period for mortgage shortfalls is 12 years.
Income tax and VAT
If you owe money to HM Revenue and Customs (HMRC) there is no time limit for these debts to be chased and the Limitation Act will never apply.
You can be pursued for money that’s owed to HMRC indefinitely.
Benefit overpayments
Sometimes, incorrect calculations or fraudulent claims can lead to the Department of Work & Pensions (DWP) overpaying benefits.
Limitation periods for benefit overpayments are 6 years. However, this usually isn’t relevant as the DWP will reclaim the money from current and future benefits.
When do these limitation periods start?
As we’ve already touched on, there are two things to think about if you’re trying to work out when a limitation period has started or when the debt might become statute barred.
1) When did you last admit to owing the debt?
Any time you admit to owing money to your creditor, this can be used as proof that the money is owed. Therefore, if you signed a letter (or sometimes even just sent an email) confirming that you owe the money, the limitation period will begin from this point.
Don’t forget, the limitation period can continue to reset – so if you go for 4 years without admitting you owe the debt, then confirm it, the 6 year period will begin again.
2) When did you last make a payment?
From a legal point of view, making a payment towards your debt confirms that the agreement is valid.
So, if you last made a payment 1 year into a repayment plan then stop, the 6 year period will start from the date of your last payment.
Again though, the limitation period will reset if you make a further payment, no matter how small.
What should you do if a creditor contacts you about a debt after six years?
If a company or person you owe money to from more than 6 years ago gets in touch, it’s important that you do not admit to owing that money and do not make a payment.
The Limitation Act 1980 is an important piece of law that is there to protect both you and creditors.
If you admit to owing the outstanding amount – even after the 6 years has passed – then the creditor can commence proceedings to have the debt legally recovered.
You are not required to make a payment if a creditor contacts you after their limitation period is up as the debt is Statute Barred. However, because the law doesn’t make the debt disappear when it’s Statute Barred, you will not be able to claim back any payment, because technically you still owe the debt, even if it can’t be enforced.
Instead, you should write to any creditor that contacts you after 6 years and quote the Limitation Act 1980.
Is it a good idea to wait out these limitation periods?
The idea of a debt becoming Statute Barred and no longer enforceable no doubt sounds appealing – but the path to getting there is long and often very stressful if you owe a company money.
Your creditor will try everything possible to recover the money for you rather than end up in a position where they cannot get it back. This often includes frequent debt collection calls, visits, and letters.
Also, your credit rating will be damaged as companies register arrears and defaults against your name. This will almost always make it harder – or impossible – to get credit while you’re waiting for the ordinary time limits to go by.
Don’t forget, money that you have been ordered to repay with a County Court Judgement will never be statute barred – nor will money owed to HMRC. As such, many people decide to explore approved debt solutions instead of sitting out a difficult 6-12 year period – especially because it means no on-going contact or debt collection action.
