Validity of Debt

[RobertRaw]

If a debt is over 6 years old , is it still active or can it be written off legally?

[stanleyman]

Court action to recover the money must be taken within six years of the debt becoming due. After that time no further action for recovery can be taken.

[stanleyman]

Should add that if court action has been taken within six years then it will continue until settled even over the six year period.

[Buenchico]

Just to clarify some details of Stanleyman's post:

Debts are never actually expunged. After a set period of time they become unrecoverable (i.e. no legal action can successfully be brought to recover the debt).

The period of six years, which is required for the debt to become unrecoverable, runs from the date of the last attempt to recover the debt. (This doesn't have to be court action. It could just be a letter). So if, say, someone defaults on a debt repayment in 2005 and the person who made the loan does nothing about it, the debt will become unrecoverable in 2011. However if, during 2010, the person who was owed the money writes a letter demanding payment, the clock starts running again and the payment won't be unrecoverable until 2017. During the intervening period, it would only require another letter demanding payment to start the clock running yet again.

It's also worth noting that the 6 year period doesn't apply where criminal activity is involved. So, if you file your tax returns properly, the tax man is bound by the same 6 year rules, as above, with regard to demanding payment from you. If, however, you defraud the tax man, there is no limit on the time which he has to pursue the debt.

Chris

[Buenchico]

Oops! Typographical error! (or I can't add up!).

'2017', above' should, of course, read '2016'.

Chris

[dzug]

The payee can write it off at any time if he thinks there is no chance of recovering it - he doesn't have to wait 6 years. But as said above, any action that indicates that the debt still exists means that he can effectively keep it alive for ever if he wishes.

[stanleyman]

Extract from the Limitation Act 1980 Time limit for actions founded on simple contract

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. (i.e. when the contract is in default, reminders do not count for time)

(1) An action upon a speciality contract (property/land) shall not be brought after the expiration of twelve years from the date on which the cause of action accrued.

(2) Subsection (1) above shall not affect any action for which a shorter period of limitation is prescribed by any other provision of this Act.

(1) An action shall not be brought upon any judgment after the expiration of six years from the date on which the judgment became enforceable.

(2) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.

Therefore the maximum time a normal contract can be considered unsettled and actionable is six years, however, there is no debt unless court action is taken and the court says so after hearing both sides and then issues a CCJ. Then add another six years before the debt is finally dead, paid or not.