Is There A Time Limit To Collect A Debt?

Did you know that there’s a deadline for collecting a debt? A lot of people don’t, so they assume they can approach debt collection slowly, giving clients a long time to pay or just not initiating the process in a timely manner. But in fact, it’s always better to act quickly when it comes to debt collection, and today we’re going to tell you why.

What’s The Time Limit?

In accordance with the Limitation Act of 1980, you have 6 years to collect a debt. This gives businesses a clear timeline of when they can reasonably chase clients for payments, and when it becomes harassing and no longer feasible. This means that if you try to seek payment of a debt that’s over 6 years old, you’re likely to come away disappointed.

If the debt is over 6 years old, then the debt becomes ‘statute barred’ (or ‘prescribed’ if you’re in Scotland and it’s over 5 years old) and the debt is unenforceable.

Are There Any Exceptions?

Like pretty much any rule, there are of course exceptions to the reclamation deadline. Sadly the majority of these exceptions probably won’t apply to you, as they apply to recovering tax and tax related debts. But there are exceptions that you may be able to use, depending on what action you took in the past.

If you issue court proceedings in relation to a debt before the 6 year period expires, then it does not become statute barred. That means you can still attempt to recover the debt even after the 6 year deadline. This is an important fact to know, as it means you could still recover debts older than 6 years if you have a court claim in respect of the debt. So never assume you’ve missed the boat.

There are certain things that can extend the date from which the 6 years begins, other than the initial date that payment became due.  For example, the 6 years can re start from the date of any part payment received in respect of the debt.  Admitting the debt extends the time too and even promises of payment can start the 6 year timer again. So, if you are in regular contact with the debtor regarding payment and they respond, you could effectively be extending the time in which you can pursue the debt.

Act Quickly

If there is any moral to this blog, it’s to act quickly when a debt becomes overdue. The sooner you recognise the debt and take action, the sooner the debt can be recovered and the money you earned can be in your bank account. Giving them time to make payment might seem appropriate in some cases, but if you’re not careful it could come back to bite you. Acting quickly also means you can put the stress of the debt and recovery thereof, behind you.  It is also often much harder and more time consuming to chase a debt, the longer you leave it.  For example, your contact at the company may have left or the details and circumstances of your invoice may have been forgotten.

This is one of the reasons we recommend calling in a debt collection agency soon, or even working with one on a retained basis to manage your overdue payments for you. This allows you to get the ball rolling sooner rather than later, as debt collectors will work quickly to recover money from your debtors and remove a lot of stress from your shoulders.

At Debtcol we specialise in working with business owners to recover money owed and put systems in place to minimise late payments in the future. If you would like more information about recovering unpaid invoices, even after a long time has passed, just get in touch with the team today and book your free consultation.