“Your debts written off!”: Is it too good to be true?

posted by in Bad advice, Debt, IVA

This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. Before considering an IVA as a debt solution, please make sure you fully understand the risks involved when entering an IVA.

If you need debt help now, use our online debt advice tool Debt Remedy or call us. We’re a debt charity and we can help.

Debt wipe out

Can you rub out your debts?

We’ve all heard or seen adverts suggesting that it’s possible to get your debts written off. It sounds too good to be true, for one reason. It usually is too good to be true.

In some cases it’s a way of enticing people in debt to take out a formal solution. There have been other less than satisfactory solutions offered by fee charging companies over the years that were less than effective, although many of these have now been outlawed thankfully.

In many cases it would be better to talk to to a free, impartial organisation for debt advice (you can get debt advice by using our online Debt Remedy tool)

So what do they offer? For the most part “debts written off” means either an individual voluntary arrangement (IVA) or assisted bankruptcy.

Let’s look at these two in more detail.

An IVA is a form of insolvency that if you qualify for would see you in a legally binding arrangement with your creditors, overseen by an Insolvency Practitioner. IVAs usually last five to six years and in most cases creditors agree to write off a percentage of your debt.

An IVA is no easy ride and isn’t the best solution for everyone.

Assisted bankruptcy is where a company charges you a fee to help you go bankrupt. Although you can do this yourself if you want, some companies try to charge to help you fill in the official forms.

This article doesn’t cover all of the benefits and considerations of an IVA. For more information about IVAs and bankruptcy visit the StepChange website for free, impartial advice.

Statute barred

However, there is a piece of legislation called the Limitation Act which refers to something called ‘statute barred’.

This is the only real piece of debt law that could see your debt deemed unenforceable, after a period of six years.

Creditors are unable to legally pursue you for most unsecured debts if, after six years;

  • The creditor has not already obtained a County Court judgment (CCJ)
  • You or any one else owing the money (on a debt in joint names) have not made a payment
  • You have not written to the creditor admitting you owe the debt

So, I hear you cry, “All I have to do to get my debts written off is ignore the creditors and not pay them anything for six years!”.

Erm no, not really, that wouldn’t actually work.

As the above explanation suggests, if you start to ignore your creditors they’re likely to get in touch with you rather quickly and may even do this through the courts, by obtaining a CCJ or other debt collection procedure available to them.

“Okay, I’ll move house and not tell them!” some might shout.

That really won’t work either as it’s your responsibility to keep your creditors updated with your current address. Moving house and not telling your creditors where you’ve gone is seen as debt avoidance. This isn’t recommended.

The Limitations Act

Importantly, the act isn’t there to encourage debt avoidance or non-payment and some judges will take a dim view of this tactic. It’s there to protect people from being forced to pay debts that have ‘timed out’ through no fault of their own.

While the act does apply to most unsecured debts the debt doesn’t disappear and it’s not ‘written off’ but with the act in force the creditor can no longer enforce the debt through the courts.

Finally, the Limitation Act doesn’t apply to all types of debt and some debts such as benefits overpayments and Council Tax don’t need to take court action to enforce debts.

We find our clients are genuine in wanting to do their best to repay as much as they can afford to their creditors and at StepChange Debt Charity we want to do our best to give you the correct advice and guide you through the maze of legislation while being impartial and honest at all times.

We sometimes come across cases where a client is on a debt management plan (DMP) with us and out of the blue a creditor they thought they had paid off years ago gets in contact to ask for money.

If this happens to you we can look into the case and give you the best advice for your circumstances. If the debt is genuinely statute barred we can give you all the advice and support you need.

Otherwise the promise to have “your debts written off” is simply too good to be true.

Matthew worked as an IVA drafter prior to working in social media. In a former life he wrote scripts for Eastenders, Emmerdale and Hollyoaks. He has 3 chickens, 2 dogs and a rabbit.

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  • Genevieve

    Hello,

    I wonder if you can clarify something for me please.
    My husband and i closed our business in 2009 as we were losing money (the business was a pub and had lost trade following the smoking ban) plus I was seriously ill recovering from ovarian cancer.
    We owe £3226.92 for non domestic rates for the period of 1.4.2008 – 8.1.2009, along with various other amounts for council tax for the pub’s upstairs flat and our own home – we have paid 65% of the outstanding council tax but still owe the non domestic rates, we are slowly clearing outstanding mortgage arrears and other debts which is continuing to cause us financial hardship, but we are determind to clear our debts.
    I have though read about the Limitations Act and wonder whether I could apply to the council for the non domestic rates to be written off on the basis of the six year rule, our financial hardship , the fact we had to close our and our paying 65% of what was owed.
    Any help would be great.

    • moneyaware

      Hi Genevieve,

      Thanks for your message and I’m sorry to hear about your
      situation.

      As we advise on consumer credit and your debts are related to a
      business, we aren’t best placed to answer your questions. I’d suggest you give Business Debtline a call, as they may be able to provide you with more suitable advice. You can find out how to contact Business Debtline here: https://www.businessdebtline.org/

      I hope this helps.

      Kind regards,

      Laura