When pursuing unpaid debts, it is crucial to be aware of the legal time limits within which claims must be made. Where situations cannot be resolved amicably, time is of the essence in recovering unpaid debts and it is crucial to know how long you have to take action.

 

What is the ‘Limitation Period’?

 

The limitation period refers to the legally defined timeframe within which a creditor must bring a claim for an unpaid debt before it becomes unenforceable. In the UK, this period is governed by the Limitation Act 1980.

 

Under Section 5 of the Limitation Act 1980, the standard limitation period for most debt claims arising from contracts (such as loans, credit agreements, and invoices) is six years from the date the cause of action accrues. Once this period expires, the creditor loses the legal right to enforce the debt through court proceedings. However, while the debt itself still exists, legal action to recover it is no longer possible.

It is essential for creditors to be mindful of this timeframe, as failing to act within the limitation period may result in losing the ability to recover the debt through legal means.

 

When Does the Clock Start Running?

 

Determining when the limitation period begins is crucial in assessing whether a claim is still enforceable. Generally, the clock starts ticking from the date the debt first became due. This is usually:

• The date the debtor was contractually required to make payment and failed to do so.
• The date of the last payment made towards the debt.
• The date of the last written acknowledgment of the debt by the debtor.

For example, if a debtor last made a payment or acknowledged the debt in writing, the six-year limitation period resets from that date. This means that a partial repayment or written confirmation from the debtor can extend the time available for the creditor to bring a claim.

Several key UK cases have clarified the application of the limitation period:

• Kirk v. Levy (2001): a written acknowledgment of debt must be clear and unequivocal for the limitation period to restart.
• Lowsley v. Forbes [1999] 1 AC 329: addresses the enforcement of judgment debts and the different limitation periods that apply.
• Bradford & Bingley plc v. Rashid [2006] UKHL 37: even informal acknowledgments, such as a letter from the debtor, could reset the limitation period.

Section 29(5) of the Limitation Act 1980 states that an acknowledgment must be made in writing and signed by the debtor for the limitation period to restart. This provision ensures that verbal acknowledgments do not reset the limitation period, protecting debtors from inadvertently extending their liability.

However, if no payments or acknowledgments occur within six years, the creditor may be unable to take legal action to enforce repayment.

 

Seeking Legal Advice on Debt Recovery

 

Understanding the limitation period for unpaid debt claims is essential for both creditors and debtors. Creditors should act promptly to recover outstanding debts before the limitation period expires, while debtors should be aware of their rights regarding time-barred claims.

 

If you are unsure whether a debt is still legally enforceable or need assistance navigating the debt recovery process, Muldoon Britton can provide expert legal guidance. Our team specialises in advising clients on debt claims, limitation periods, and effective recovery strategies.

Contact our team today to discuss your case and ensure you take the right steps to protect your financial interests.