Limitation Act of 1969
The Limitation Act of 1969 defines the statute of limitations and stipulates the time when the right of enforcement under a contract expires. There are two scenarios in which the creditor cannot request payment for a debt by law; when the statutory limitation period for enforcing the debt has expired and when the debtor has been declared bankrupt. In both situations the debt has become “statute-barred,” which means that the debt collector does not have the right to imply or state that there will be legal actions taken against the debtor in an attempt to enforce the debt.
The limitation period for contracts is 6 years, starting from the date on which the cause of action first accrued to the creditor, such as when the debt becomes due and payable, pursuant to sect 14 of the Limitation Act 1969.
The rules relating to a deed and a judgement are different, the limitation period for a deed is 12 years from the date on which the cause of action accrued and it is also 12 years for an action on a judgement from the date on which the judgement becomes enforceable; sect 16 and 17 Limitation Act 1969.
The limitation period of a contract can be restarted if the debtor confirms the debt by making payments or in some other way acknowledge the debt. If the debt is confirmed, the result will be a new limitation period of 6 years, starting from the date of the confirmation; Sect 54 of the Limitation Act 1969.
If the limitation period for a contract has expired, a debt collector should not imply or state that there can be legal actions taken against the debtor if payment is not made in relation to the debt.
The limitation act does not prevent the creditor from commencing proceedings against a debtor to recover payment even though the limitation period has elapsed, but the creditor should be aware of the debtor’s right to support the defence on the regulations of the Act.
In summary, debt collectors should be careful not to represent to the debtor that legal actions may be taken to enforce a “statute-barred debt” or mislead the debtor by stating that the debtor is obligated to pay for the debt even though it is “statute-barred”.
When a debtor becomes bankrupt, a trustee is appointed to be responsible for and effectively take care of the debtor’s assets and also to manage the debts. By the time of the bankruptcy, the debtor is only liable for debts incurred after being declared bankrupt.
Creditors can lodge a proof of debt with the trustee but it is ultimately up to the trustee to determine which creditors will be paid out of the debtor’s assets. Therefore statements which implies that the debtor is still liable to pay the debt to the creditor, may be considered as misleading or deceptive conduct. A debt collector should not represent to the debtor that legal actions may be taken to enforce a “statute-barred debt” since such a statement may result in misleading or deceptive conduct.
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