A few weeks ago we told our clients that if they want...
Statute barred debt: A step-by-step guide
We never encourage people to avoid paying their debts. You won’t hear us making false claims about “getting your debts written off”. That’s what daytime TV advert breaks are for.
We’re here to give the expert debt help and practical solutions people need to get back in control of their finances.
That being said, we’re here for you. And as my old school teacher use to say (a lot), “knowledge is power”. I want you to be armed with everything you need to get debt free and stay there. That’s why I want you to know about statute barred debt.
Update: Read more about statute barred debt on our website.
What is statute barred debt?
Statute barred debt refers to a debt that’s not enforceable because the time a creditor has to chase payment has passed. This is outlined under the Limitation Act 1980.
The act is not a way for people to avoid paying debts. If your debt is not statute barred there’s no way to use the Limitations Act to avoid paying it. But non-enforceable debts are sometimes pursued by debt collection companies when they shouldn’t be, so it helps to know where you stand.
How long can a creditor chase a debt for?
Under the Limitation Act 1980 a creditor has six years to chase most unsecured unpaid debts, or twelve years for some mortgage shortfalls. This ‘limitation period’ starts from the time of your last payment or acknowledgement of the debt, not the total length of time you’ve been making payments. If a court judgment (CCJ) has been registered against you before the limitation period has passed it can be enforced at any point. There is no limitations period for a CCJ.
For Scottish debts the rules are different as statute barred debts cease to exist (and creditors aren’t allowed to ask you for payment) after five years, unless the court has issued a Decree before the five year limitation period.
The Limitation Act doesn’t apply to debts owed to the Crown such as income tax. Because the act prevents court action, some debts such as benefits overpayments and Council Tax sometimes use different collection methods that don’t involve the court, which means the debt can be collected even after six years have passed.
When can the Limitations Act 1980 be used?
The act states that when ALL of the following conditions are met a debt cannot be enforced:
- The creditor has not registered a County Court judgment (CCJ) against you
- You (or with joint debts, you and the other person) have not made a payment in the last six or twelve years
- You have not admitted the debt in writing in the last six or twelve years
There’s more information on our main website about exactly when the limitation period starts.
What does ‘not enforceable’ actually mean?
If a debt is statute barred it isn’t ‘written off’ and it doesn’t disappear. If a debt is not enforceable it means that if a creditor tries to take you to court, you’ll be able to defend the case and you won’t get a CCJ. Creditors aren’t allowed to keep chasing a debt that is statute barred if they haven’t been in touch with you at all during the six year limitation period, but they can keep asking you for payments if they’ve been in regular contact. If you’ve changed address without telling the creditor or not opened the letters, this doesn’t mean that creditors haven’t tried to contact you.
Some creditors, such as the DWP (Department for Work and Pensions), have legal powers which allow them to take money from wages or benefits without going to court. They can still do this even if the limitation period has passed.
What to do if you think your debt is statute barred
The thing with a statute barred debt is that the burden of proof is with the creditor to prove you do have to pay it, not for you to prove you don’t. If a creditor has contacted you and you definitely know the debt is statute barred you should write to the creditor to tell them.
Template letter for statute barred debt
Here is the statute barred template letter (PDF) you can send. just add your name, address and the creditor’s details at the top. It doesn’t have to be exactly the same as this if you’d prefer to write your own.
Here’s what to do if you think your debt is statute barred:
- First of all you should get a copy of your credit file. You can do this for free at Noddle
- Write to the creditor contacting you (using the template letter above). Send the letter recorded delivery from the Post Office so you can prove they received it
- Be aware that if the full six or twelve year period has not passed, if you make a payment the limitations period would start again from that point
- If they continue to chase you without sending proof complain to the Financial Ombudsman who will take up your complaint. Don’t go to the Ombudsman first as they’ll bounce back your complaint
- If they do send proof and you’re liable don’t feel pressured to pay more than you can afford. Use our confidential online debt advice tool, for a free budget assessment and personal action plan explaining exactly how to deal with your debts
Of course just because a debt is statute barred, it doesn’t mean you can’t pay it off. If you know you owe the money you may want to pay it back. As they’re non-priority debts creditors are only entitled to payments you can manage and we can help you work out the quickest way to pay the debt back.
We get lots of comments on this post, so if your question hasn’t already been answered in the article, have a read through some of the many questions we’ve answered for other people.