What is the Statute Bar on Personal and Business Debts in the UK?

Question from A, What is the Statute Bar on Personal and Business Debts in the UK?

Answer from AI:

In the United Kingdom, the statute bar on personal and business debts refers to the time limit within which a creditor can take legal action to recover a debt. This is governed by the Limitation Act 1980.

Time Limits for Different Types of Debts

The Limitation Act 1980 sets out different time limits for different types of debts:

• For unsecured personal debts like credit cards, personal loans, and overdrafts, the time limit is typically six years.
• For debts related to a County Court Judgment (CCJ), the time limit is six years from the date of the judgment, regardless of whether you’re paying it or not.
• For mortgage shortfalls, the time limit is twelve years.
• For income tax, VAT, or capital gains tax debts where the tax office has not made any contact for at least six years, the time limit may be twenty years.

When Does the Limitation Period Start?

The limitation period starts from the time when the debt becomes due and payable. However, the clock can be reset if you acknowledge the debt in writing or make a payment towards it.

What Happens When a Debt is Statute Barred?

If a debt is statute barred, it means the law says that the debt still exists but the creditor can no longer take you to court to get you to pay it. However, this doesn’t mean the debt disappears. The creditor can still contact you to ask for payment.

Seeking Legal Advice

The rules around statute barred debts can be complex, and there are exceptions to these general rules. For example, the time limit does not run while the debtor is bankrupt, a minor, or mentally incapacitated. Therefore, if you’re dealing with a potential statute barred debt, it’s important to seek legal advice to understand your rights and obligations.

You can consult with a legal professional or contact organisations like the Citizens Advice Bureau for free advice.

Remember, this information is a general guide and not a substitute for professional legal advice. Always consult with a legal professional for personalized advice.