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Debt recovery – bringing a claim

For any business, particularly a small one, having payments outstanding can seriously affect business cash flow.

If you have an outstanding invoice, the first action to take is to send the debtor a late payment reminder letter with a request for payment as soon as possible. If this doesn’t initiate payment, follow with a more forceful late payment demand letter, requesting payment within a set time period including a claim for interest.

If these letters do not result in payment a formal letter before action should be sent informing the debtor of the intention to issue court proceedings.

Is there a time limit to claim a debt?

To bring about a debt recovery claim in court you need to consider the limitation periods that apply.

Any claims that fall within the jurisdiction of the Courts in England and Wales, have limitation periods. These are time limits that a claim can be brought. These limitation periods are set out in the Limitation Act 198. It is important that when bringing a claim, it is done within the relevant limitation period. If this has expired, the Defendant has a complete Defence to the Claim.


How long do I have to recover a debt? 

In cases of debt recovery, a starting point is looking at whether the claim is time-barred.

Many debt recovery matters fall under that of a simple contract. The limitation clock starts on the date that the contract was breached. 

Generally, in commercial debt recovery matters, an invoice will have been issued. The clock will start the day the invoice was due for payment. The Limitation Act provides a period of six years for actions in respect of simple contracts. This means that if the invoice became overdue for payment on 27 October 2023, then the limitation period to bring the claim will expire on 27 October 2029.

On a personal level, perhaps you have given a monetary loan to someone, say £5,000.00, and agreed a point at which it is to be paid back, say 27 October 2013. If the payee does not comply with returning your money, basic terms such as this are likely to be construed by the Court as a simple contract and the six-year clock will start running. In other words, it will be treated the same as a business debt.

Whether you are a business or an individual that is owed money, it is surprising how quickly those six years can pass by.


Can the limitation period be extended? 

The Limitation Act 1980 provides for cases of debt recovery, for the time to start running from the date on which;

  • Acknowledgement of the debt in writing;
  • A part payment is made.

Whilst this enables a current limitation period to be repeatedly extended, a right of action, once time barred, cannot be revived by any subsequent acknowledgement or payment. Essentially, if you have heard nothing from your debtor within six years of the cause of action, receiving a payment or acknowledgement after that time will not provide a retrospective extension for a Claim to be brought.

The Limitation Act 1980 provides a specific form of an effective acknowledgement, that it must be in writing and signed by the person making it. If you receive an acknowledgement, it would be advisable to check that this satisfies the requirements before reliance is placed on it, extending the limitation period.

It is also possible to stop the limitation clock by issuing a Claim Form in Court or entering into a Standstill Agreement. The effect of a Standstill Agreement means that the parties agree to the limitation period to stop running and from expiring. This is useful if there are ongoing settlement discussions and if more time is needed to properly prepare your Claim for issuing at Court.

Can we help?

If you are struggling to get your debtors to pay, contact our team which will be happy to discuss your issues and find a way to solve them.

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