Law relating to Statute barred debts

[Nattie]

IHTM28384 - Law relating to debts: statute-barred debts

If a lender allows time to pass without receiving any payment an action for recovery may become barred.

Under the Limitations Act 1980 the time limits are

• in simple contracts, 6 years
• in contracts under seal, 12 years.

If the debtor acknowledges the debt in writing or makes a part payment within the original limitation period, then the time limits start to run again from the date of acknowledgement or the date of payment.

Even though the lender may be barred from pursuing recovery, a debtor may decide to pay the debt after the expiry of the time limits. Because of this you should allow a debt which is otherwise statute-barred if the personal representatives pay the debt and you receive evidence that the payment has been made.

The above instructions do not apply to debts in Scotland. Under Scottish law, if a lender allows time to pass without receiving any payment an action for recovery may become barred under the Prescription and Limitation (Scotland) Act 1973. (For details of this Act see Gloag and Henderson 10th edition at Chapter 15.). These debts are completely extinguished and cannot be enforced. Once the prescriptive period expires the debt cannot be allowed as a deduction.
Law relating to debts: statute-barred debts