How Long Do You Have To Recover A Debt In England and Wales?

For many businesses, unpaid invoices are something that can often be put off until later, especially for smaller businesses with limited resources for credit control. However, timing is key to being able to successfully recover debts and delaying too long may stop you being able to legally recover the debt at all.

In England and Wales there is a time limit for being able to bring legal action to recover a debt through the Court. These time limits are governed by the Limitation Act 1980. Understanding how these rules apply is essential for any business managing overdue accounts.

The General Rule: Six Years

For most business debts where they arise out of a contract the limitation period is six years.

This means that Court proceedings must be issued within six years of the cause of action arising, usually this will be when an invoice becomes due for payment. If that deadline passes the debt will become statute-barred, meaning it is no longer enforceable through legal action albeit that there are some exceptions to this rule that may extend the limitation period.

For businesses that carry aged debt, this is a critical point. Once the limitation period expires, legal recovery options are significantly restricted.

When Does the Six-Year Period Start?

The six-year period runs from the date of the cause of action, this could be date the invoice was issued or the date that payment became due.

Can The Time Limit Be Extended?

If during that six year period the debtor acknowledged/admitted the debt in writing in open correspondence or made a part payment towards the debt, this may in some circumstances extend the limitation period.

This can be significant in practice particularly where there has been intermittent engagement over time.

It is important to note that a verbal acknowledgement is not sufficient; it must be in writing.

What Happens When a Debt Becomes Statute-Barred?

Once the limitation period has expired, the debt still technically exists, but you will no longer have the legal right to pursue it by way of Court proceedings.

This means that businesses may have to simply write off those debts because action was not taken in time.

What If the Debt Is Due Under a Deed?

The Limitation Act 1980 has different limitation periods for bringing a claim depending on the nature of the claim and the legal basis of the same.

The six year limitation period applies to contractual claims. For debts that have accrued under a deed the limitation period is typically 12 years.

What About Enforcement Of Judgments?

If you have issued proceedings and obtained a County Court Judgment, this will remain on the register of County Court Judgments and continue to impact the debtor’s credit for up to six years, after which it will be removed.

You can still enforce a judgment after it is six years old, provided that you can obtain permission from the Court to do so. Although you will need to provide the Court with a good reason as to why enforcement action has not been taken or delayed.

A More Structured Approach

For businesses managing overdue accounts, having a clear understanding of limitation periods is essential, but having a good credit control process is better.

Knowing when a debt becomes due, monitoring any payments or acknowledgements and introducing a structured recovery process at the appropriate stage can make a significant difference.

Often the longer a debt is left the harder it is to recover and in some cases you may miss the opportunity to try to recover the debt through the legal process if you wait too long.

At Lovetts we can help businesses stay on top of their credit control processes and provide support for this in our pre-legal team. We will also note any limitation deadlines when you instruct us.

Taking the appropriate action at the right time can be the difference between successful recovery and a write off.