The Ministry of Justice, MoJ, is considering reducing the statute of limitations for civil debt from six years to three.

Over the coming months the MoJ will launch a consultation with trade body stakeholders as they debate the length of time lenders have to collect civil debts.

There should be a draft consultation by the end of this year and if the measure is accepted then it will be attached to the civil justice reform Bill.

Any reduction in the current six year period could lead to a massive change in the way civil debts are pursued and would inevitably lead to much quicker legal action being taken by lenders or appointed agents to recover their debts.

The Limitations Act 1980 outlines the time limit within which a creditor can pursue a debtor for outstanding debts and only applies when no contact has been made between the creditor and debtor within the given time limit. This Act applies to residents of England and Wales.

Creditors are given a fixed period of time to chase their debtors and the time scale mainly depends on the type of debt and can be extended at the courts discretion. The time limit begins when you last admitted owing the money or made a payment.

Should the creditor fail to maintain contact with the debtor, for a period of 6 years or more, it is possible to claim that the outstanding debt is "Statute Barred" under the conditions of the Limitations Act 1980.

In Northern Ireland, statue barred debts are governed by the Limitation (Northern Ireland) Order 1989. In Scotland, statute barred debts are governed by the Prescription and Limitation (Scotland) Act 1973 which states that the debt itself ceases to exist after five years providing that it has not been acknowledged and that no relevant claim against it has been made by the creditor.

We have more on the Limitation Act detailing how it affects certain types of debts. We also have  a template letter for you to download and send to the lender if you feel the debt is out of the legal time limit for recovery, just click here.

Source: Credit Today