MoneyMagpie

Oct 29

Can you get your debt written off after six years?

Guest article from MoneyAware

When we’re faced with a debt problem, it can feel overwhelming, so of course we’d all like to wave a magic wand and make our debts disappear.

Being realistic, it’s unlikely that’ll actually happen. However, in some circumstances a debt can become what’s known as ‘statute barred’, meaning that it can no longer be enforced through the courts.

We’d always encourage you take reasonable steps to deal with your debts, rather than avoiding the debt or looking for ways to have your debt written off, which are unlikely to work. That’s why we provide free advice to help you do this.

Statute barred debt is a pretty important thing to know about because it affects the things a creditor can do to ask you to pay back a debt after a certain time.

We don’t want to deny you of that knowledge so let’s get down to business.
Firstly, the rules for statute barred debt vary depending on where you live in the UK. In this article, we’re talking about statute barred debt in England and Wales.

 

What is a statute barred debt?

If a debt is statute barred it means the creditor can’t take you to court to get the money, even though you still technically owe the money.

It’s important to note that the statute barred rule tends to apply to unsecured debts. We’ll cover a bit more on that in a bit.
 

How does a debt become statute barred?

Excellent question! A debt becomes statute barred in England and Wales if no court action has been taken and more than six years has passed from whichever of the following is most recent:

  1. The last time you made a payment
  2. The last time you acknowledged the debt in writing – this usually means you’ve not sent any letters or emails to the creditor
  3. The earliest date your creditor was legally entitled to start court action to recover the debt – this usually means the date the debt defaulted according to the terms and conditions of your agreement (not the date a default notice was a issued)

Exceptions: There are a few debts where the timeframe changes a bit. Someone’s always got to be different, eh?

  • Personal injury claims become statute barred after three years
  • Some mortgage shortfalls become statute barred after 12 years

 

Is the statute barred rule actually legal?

Why yes, yes it is. These rules are in place to protect borrowers from unfair practice and are part of the Limitations Act 1980.

So basically, if a creditor hasn’t been chasing the debt for the last six years, they haven’t taken reasonable steps to get payments back. It’s not really fair for them to be able to ask for it again after six years.

 

Can all debts become statute barred?

Not all debts are created equally and so the statute barred status can only be applied to most unsecured debts.

Debts that are usually covered include:

  • Personal loans
  • Credit and store cards
  • Payday loans
  • Loans from friends or family
  • Contracts for services like a gym membership or a phone
  • Rent arrears
  • Mortgages and mortgage shortfalls
  • Hire purchase

Debts that aren’t covered include debts that already have a County Court judgment (CCJ) against them or tax debts owed to the Crown for example, council tax.

The Limitation Act can be used to stop court action, but there are some debts that can be still be collected using different collection methods not involving the court. These include debts such as benefit or tax credit overpayments. That’s because the DWP and HMRC have extra powers to collect debt from your wages or pension without needing a court’s permission.

Similarly student loans taken out after 1998 aren’t affected because the Student Loans Company takes money straight from your wage and doesn’t need any court permission to do this.

 

My debt is statute barred, now what?

If you’re being chased for a statute barred debt, you can write to your creditor to let them know and request they stop chasing you for it. We have a statute barred debt template letter you can use to do this. It’ll be up to them to prove that the debt isn’t statute barred, not you to prove the other way.

 

Can a debt become ‘un-statute barred’?

Once a debt is statute barred, it’s statute barred for life, even if you later make a payment towards it after the six year limit.

However you can restart the limitation period if you acknowledge the debt or make a payment towards it before the six years is up. So if you had a debt and didn’t make a payment towards it for four years and then paid one instalment, the six year timeframe would start again.

 

Can a creditor take me to court for a statute barred debt?

If your creditor issues a court claim for a statute barred debt, you’ll have to respond to tell the court that the debt is statute barred. You may have to provide more information and there could be a court hearing to look into this further.

If the debt is statute barred, the creditors’ court claim will be thrown out and you won’t receive a CCJ. But if the court finds it’s not actually statute barred, you’ll receive a CCJ.

If you’re struggling to pay your debts, don’t rely on or hope that they can be written off. We can offer free and impartial debt advice.

 

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