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

posted by in Bad advice, Debt, IVA

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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 most 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 virtually every case it would be better to come to us for proper debt advice (you can get counselling via our online service Debt Remedy).

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, most companies try to charge to help you fill in the official forms.

If bankruptcy is the best option for you StepChange Debt Charity has a specialist bankruptcy team that will guide you through the process for free.

Statute barred

However, there is piece of legislation called statute barred. This refers to the Limitations Act.

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 the debt 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 liable 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

The Act isn’t there to encourage debt avoidance or non payment and most 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.

The money owed itself is not written off; it’s still a debt and in reality it still exists, but with the Act in force the creditor can no longer enforce the debt.

The important thing to remember is that there are laws to protect you from being chased for very old debts that you weren’t aware of. However these laws cannot be twisted to help you get away without paying.

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 come across cases where a client is on a debt management plan with us and out of the blue a creditor they thought they had paid off years ago gets in contact to demand some 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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Tags Bad advice Debt IVA
  • Sam

    If my debt was based on an agreement signed as a deed not a contract does this also expire after six years? Please advise the below for both a contract and a deed. Does the lender still need a county court order before six years if they have a charge on my flat? What if they do not get a county court order before six years do the charge and loan both expire?

    • moneyaware

      Hi Sam

      Thanks for posting.

      To answer this question more specifically I would recommend that you speak to us. You can contact us by visiting http://www.stepchange.org/contactus.aspx and we’ll be happy to help discuss your options with you in more detail.

      I hope this helps, we look forward to speaking to you soon.

      Rory

  • Brenda John

    Hello,

    Good day to you all my name is Brenda from Australia, for year i have tried to obtain a loan from the internet to set up a business but all i have get is noting but cheaters who have succeeded in taking the4 sum of $7,000 from me, but kept searching because i need the loan to enable me raise my business, one day i saw a comment online by a man from the USA name Micheal Rindels thanking the Kenneth Walters Loan Company for lending him a loan so I took the email of the company and contact them and to God be the glory they lend me a loan amount of $50,000.00 which enable me to start my business and become great. so my dear friend i give you this peace of advice to contact the Kenneth Walters Loan Company now because i know fully well that you will receive the loan from the company. Here is the company email address:kennethwalter.loanfirm@hotmail.com

    Good luck.

  • chrissy

    Hi, Can you put my mind at rest here. I was made Bankrupt in Feb 08, Discharged in Oct 08, Reason i had to go bankrupt was cause of the relationship at the time ended, He did not pay the mortgage and i was at the time on incapacity benefit, the house got repossessed and auctioned off. Anyhow today i have received a letter from a debt recovery asking for a shortfall of a mortgage, i am presuming its that house as i have not had another mortgage since. Can you confirm that i am not liable for this shortfall of £18,000, i am worried sick here!

    • moneyaware

      Hi there Chrissy, thanks for getting in touch.

      I would contact the mortgage lender and tell them that you went bankrupt and are therefore not liable with this debt. Tell them to speak to the Official Receiver who handled your bankruptcy and the court where it was processed. It might be a good idea to let your Official Receiver about this, too.

      Best regards

      Rachel

      • chrissy

        Thankyou Rachel for your reply, I rang my official receiver and I have to forward the letter to him and he is going to deal with!
        Thanks again
        Chrissy

  • cara

    hi.can you put my mind at ease please.

    over 20 years ago my now ex and i took out a secured loan on are property of 4800, we split up soon after and my ex went bankrupt, but today i got a letter asking me to repay the loan.

    is it still down to me to pay, even though my ex went bankrupt for the house and loan on it.

    thanks cara

    • moneyaware

      Hi Cara,

      Thanks for getting in touch with us.

      The answer to your question depends on a few different things.

      You would need to find out what happened to the property when your ex-partner went bankrupt, this would help find out if there is still any liability to repay the debt.

      It’s unlikely that there is, as it’s been over 20 years and the debt may now be ‘statute barred’ under the Limitations Act. You can read more about this at http://moneyaware.co.uk/2013/10/statute-barred-debt/

      If you’re unsure what happened, I would recommend speaking to the Insolvency Service to find out, particularly since it’s been over 20 years now. You can contact the IS at https://www.gov.uk/government/organisations/insolvency-service

      Once you have this information you’ll be able to find out what to do next. You can also talk to us by visiting http://www.stepchange.org/contactus.aspx

      I hope this helps,

      Rory

  • cara

    Hi Rory.
    and thanks for replying so quick.
    the house got sold at auction for 25% of the value that we paid for it,
    and nothing has ever chased me for any money oweing on that property.
    the loan was secured on the house aswell.
    thanks again cara

    • moneyaware

      Hi Cara

      Thanks for getting back to us.

      If the house was sold at auction then there may have been a shortfall with either the mortgage or secured loan.

      For secured loans including mortgages, the creditor has 12 years to take further action to enforce the debt through the court for a county court judgement (CCJ) or other method of enforcement.

      When your partner declared bankruptcy their part of the debts will have been written off, however with joint debts it become the responsibility of the other party to pay the remaining balance.

      If no payments have been made and the creditor hasn’t taken further action against you then the debt could be ‘statute barred’ under the Limitations Act. This means that it’s now unfair for the creditor to take further action as they’ve had long enough to do this already. The law is designed to protect you, rather than as a way to avoid repaying debt.

      With this debt being over 20 years old, unless you’ve been paying something towards, acknowledged liability or the creditor had taken further action then it’s unlikely that you’re still liable to repay the debt. If the creditor had taken further action and you were unaware of this then they would need to prove this to you.

      If you believe the debt to be unenforceable then you can send a letter explaining this. There’s more information on how to do this at http://moneyaware.co.uk/2013/10/statute-barred-debt/

      I hope this helps,

      Rory

  • moneyaware

    Hi Lisa,

    A good way to start is by looking at your credit report. You can get a free online credit report by visiting http://www.noddle.co.uk. This should show most debts you’ve taken out but might not show some older debts.

    If you’ve got other debts that you aren’t aware or aren’t showing on your credit report then you might need to try to find paperwork, letters or account numbers so that you can work out if there’s any balances left to repay.

    If you’re struggling with debt, bankruptcy might not be the only option and we can help you. You can speak to our free Helpline by visiting http://www.stepchange.org/Contactus.a….

    I hope this helps, please feel free to get in touch with us if you need any extra help.

    Rory

  • helen fuller

    Hi
    Today I received a letter from a debt collector “arrow global” firstly it was addresses to a name I married into in 2000 and divorced 2004!!! Secondly its for a debt sold by littlewoods to whom I have never knowingly purchased from, I say that because I believe some company’s trade by many names sister companies etc but I know I have never ever made a purchase from littlewoods. The original date of agreement was 25th October 1999!!!!! Interestingly when this was apparently taken out I was known by my maiden name so where they got the name that they did from is a little strange.

    It says the balance outstanding is 4th sept 2014 and £113.90

    It does say I can pay 50% off £56.95 in the next 60 days they will clear the remaining balance and the debt will be settled.

    I do not believe that I owe this money and even if I did surely after almost 15 years they can not chase me fgir it???? It the first time I have heard about this debt too!!!

    Do I really owe it and have to pay it back???

    Thanks

    • moneyaware

      Hi Helen

      Thanks for getting in touch with us.

      If you don’t recognise the debt then you could contact the creditor and explain this to them. They should be able to provide more information for you, particularly if they’re now the company responsible for collecting the debt.

      You can ask them to send out more information to you so you’re clear on what the debt was originally for. Because it’s been such a long time then the debt may now be ‘statute barred’ which means that the creditor has had long enough to ask you to repay the debt. You can read more about statute barred debts at http://moneyaware.co.uk/2013/10/statute-barred-debt/

      Once you have more information from the creditor this should help you understand more about where the debt has come from and why the creditor is asking you to repay it.

      I hope this helps

      Rory