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Understanding Debt Limitations

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Debt Limitations - All You Need To Know

Are you confused about debt limitations/liability? There are laws that protect consumers from debt collectors coming after them many years after the debt was incurred. If you stopped paying on a debt, and if it fits into the right category, there is a time limit for how long the creditor can come after you. Depending on the type of debt will depend on the time limit.

We all tend to get in over our heads sometimes. No matter what the good intention we can still end up deep in debt with no way to pay off what we owe. Some of us choose to stop making repayments. This is not a good idea but it does happen. If you have stopped paying on a loan because you could no longer afford to pay it, there are still rights that you have. However, the creditor also has rights. He can try to collect that debt by taking you to court, but there is a time limit.

The timescale for debt limitations is generally six years. That is for unsecured loans or personal loans. It also covers credit cards, store cards, finance company loans, unsecured bank loans and catalogues. If you stop paying on these types of debt and no contact is made for six years the creditor or the collection agency cannot take any action against you.

The Limitation Act 1980 is what set this in place. According to this Act the creditor cannot bring a lawsuit against you or try to force you to pay as long as six years have passed and there has been nothing done during that period. Banks and finance companies sometimes forget about loans. They do not always keep track of who owes what and when it is owed. That is how the loan can end up running over six years with no contact.

If the creditor brings action against you before the six years is up he can collect on the debt. If you have made just one payment in the six years the creditor can get his money. If you write to the creditor and admit you owe them money he can also collect.

If the creditor tries to collect from you after you have not heard anything from them or you have not contacted them in six years you can write them a letter stating the facts involved in the statute. Explain to them they have no case against you any longer because of the debt limitation rules. According to the Limitation Act 1980 they cannot take any further action against you. When they receive this letter from you they should drop everything. Always keep a copy of all correspondence that you make to the creditors.

If they continue and take you to court, it should be thrown out. The creditor cannot collect on a loan that is over six years old. Remember however if in that six years you contact the loan company and admit you owe them money the loan can still be collected on. They then have reason to take you to court to collect the loan. If in the six years you make one payment, even if it is a partial payment the debt limitations/liability will continue and they can take you to court.

Creditors chasing you for payments can be distressing at times. When the statute is up on the loan they have no right to harass you. They cannot force payment from you if the debt limitation period has passed. When they allow six years or more to pass on a loan and then try to collect they are in the wrong and you do not have to pay. The creditors should know this but they may try to make you pay anyway. You can report them to the Office of Fair Trading. The OFT will not take an individual case but they will keep tabs on the creditor. If there are several complaints about that creditor the OFT can pull their licences.

You do have rights when it comes to the loans you have. When creditors do not pursue a loan for six years or more they must write it off as a loss. They cannot force you to pay. Secured loans have different limitations on them. You will want to check the internet to see when the debt limitations/liability is up on your particular loan.

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