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.
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.
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.