What Happens To My Debt When Statute Barred?

If it takes time for your creditor to take action in collecting your debt payment, your debt becomes a ‘statute barred’. When this happens, your creditor can no longer recover the debt through the court. Basically, the debt in this matter is written off through debt payments that haven’t been done or paid.

The duration for a debt to become statute barred depends on its type. In Scotland, debts no longer exist after a certain span of time as it becomes ‘prescribed’

This may sound unfair for creditors when pertinent documents are lost or for a debt that’s been long.

As the debtor, you also have a responsibility not to ignore your debts as this may result in an undesirable outcome. We recommend checking our article on the consequences of ignoring the debt and on how can your creditor find you.

Statute Barred or Prescribed Debt

Statute Barred Debt: England, Wales, and Northern Ireland

Debts will become statute barred when creditors failed to act on time in taking legal matters to court to collect debts. Statute Barred or also known as ‘unenforceable’ debts is the process wherein the law prohibits the creditor to seek for legal help such as a court judgment order to recover the amount that you owe. Basically, the debt still exists yet the creditor can no longer take necessary actions or court judgment against you. However, they can still find ways to collect your debt depending on the agreement and on the type of debt.

Prescribed Debt: Scotland

In Scotland, debts will become prescribed when the creditor waited too long. The law hereby declares that the debt no longer exists. In this manner, the creditor cannot take any actions to recover the debts any longer.

To find out more on the details related to recovering debt payments, read our guide regarding debt collection.

How Long Will It Take For My Debt To Be Written Off?

There is a certain period set by law that dictates when can a creditor can start considering court actions regarding debts. The duration is not the same as it will depend on the type of debt. This duration is called the ‘limitation period‘.

Limitation Period: England, Wales, and Northern Ireland

The limitation period for most debts in England, Wales, Northern Ireland, and Scotland is usually six years. 

The types of debts included are:

However, some exemptions are as follows:

  • A mortgage has a longer limitation period compared to your other types of debt. The money you owe has a limitation period of 12 years while 6 years for the interest charges.
  • 3 years limitation period for a personal injury claims
  • Income tax, capital gains tax debts, or VAT that you need to pay to HMRC doesn’t have a limitation period. This means you can be taken to court when you fail to settle these types of debts.
  • If CCJ or County court judgment has been requested by your creditor, regardless of the length you’re unable to settle, these won’t become statute barred.

Limitation Period: Scotland

If you live in Scotland, most types of debts have a prescription period of 5 years. 

The exemptions are:

  • Mortgage prescription is 20 years for the capital you owe and 5 years for interest charges.
  • Council Tax and Some benefit over payment have a prescription period of 20 years.
  • Income tax, capital gains tax debts, or VAT that you need to pay to HMRC doesn’t have a limitation period. This means you can be taken to court when you fail to settle these types of debts.
  • If a decree was obtained by your creditor, regardless of the length you’re unable to settle, these won’t be prescribed.

How Will I Know If My Debt Is Statute Barred or Prescribed?

This relies on the amount of time time that transpired since the beginning of the limitation period. That time is which of the circumstances below occurred lately:

The date you sent a letter to the creditor as an acknowledgment of your debt

The letter written to be sent to your creditor in recognition of the amount that you owe must be signed and if not email it. If you have a joint debt, written acknowledgment has to be signed by both. Since the name of the person who signs will be counted.

Also, you can request a third party to draft a letter to your creditors. This can only happen with your consent. These letters can be from advice agencies or debt management companies.

Below Do Not Count as A Written Acknowledgment

  • A letter stating you do not owe the debt
  • A letter sent by the creditor to you
  • Verbal conversation via phone

The last payment you put towards your debt

If the debt is in shared names, payment by either person will add as the beginning of the limitation period for both people. A fee to the creditor by a debt management firm or advice agency working on your part will also be accepted.

The earliest possible date your creditor could have seek legal action through the court

This will differ depending on the type of debt. For most consumer debts like store cards, payday loans, personal loans, credit card, your account will be in default 14 days after you get a notice warning to keep your payments up to date.

Also, it was previously perceived that limitation depends on the earliest date your account could have defaulted regardless of when the default notice was issued. There is no longer applies, under a Court of Appeal Ruling that states that a debt cab becomes statute-barred six years after the expiration of the default notice. This applies to those residing in England, and Wales, while Scotland has cases alike.

For other types of debt, the earliest your creditor can file court legalities could be difficult to understand. So, we suggest that you contact us for free debt advice and we’ll be happy to answer your debt questions.

Moreover, to figure out yourself on when your debts can become statute barred or prescribed, you can add the limitation period of your debt and the last payment you’ve made. Besides, when your creditor has pursued court action to collect your debts before the limitation ends. Your debts won’t be statute barred or prescribed.

What Happens After the Limitation Period has Passed?

When your debt becomes statute barred, you can’t have it renewed even if you made some payments.

Additional Information:

The FCA or Financial Court Authority says that it would be unfair for a creditor to consistently obliged you to pay a debt that becomes statute-barred or prescribed when you have informed them that you do not intend to pay.

Once you informed and shown to the FCA that your limitation has passed and notify them you won’t pay your debt, they will stop reaching out to you. This applies to several debt types of consumer debt such as:

  • credit
  • store cards
  • payday loans
  • personal loans
  • overdrafts
  • catalogues

Some possible consequences or actions that your creditor can take depends on where you reside in the UK.

In England, Wales or Northern Ireland

The creditor can no longer get a CCJ or money judgment when a debt is statute-barred. They can’t also make you bankrupt when this happens. However, as the debt yet legitimately not paid the creditor could reach out to ask your payment. This is when your creditor is not regulated by the FCA.

Some creditors hold the authority to take an extra initiative to recover debts without going to court. This for them to make money even if your debts become statute barred or prescribed. This is chiefly referred to as DWP or local authority benefit over payments or HMRC tax credit over payments. This will allow creditors to take the money straight from wages or benefits without appealing matters to court. This is cone through a direct earnings attachment or DEA.

In Scotland

Since the law dictates that the debts no longer exist when it becomes prescribed, creditors can no longer recover such debts. In fact, if you have made any payments, you can ask your creditor to return your payment.

In some instances, your debt might still be in your credit report even when its statute barred. This implies that lenders or other creditors can access it, making it hard to obtain a credit or loan when you apply in the future.

What Should I Do If My Debt Becomes Prescribed or Statute Barred?

The actions or steps will depend on how certain you are that your debts have been statute barred or prescribed.

If you’re assured the limitation period has passed

If your creditor did no reach out, then you must not do anything. When you are sure that your debt is statute barred, and in case you receive calls, emails, or any means to which your creditor contacts you, you can write them a letter notifying them that you won’t be making any payments further. If they told you that you still owe them, you may ask them to send some evidence.

 If you’re not guaranteed the limitation has passed

There are cases when the written acknowledgment ya be uncertain. Besides, it might be difficult to recall your last payment and the exact dates to see if its been 5 or 6 years had passed.

When this happens, you can review payments you’ve secured to debt by obtaining a copy of your credit record or checking our old bank statements. Alternatively, think of any significant life circumstances that you can associate with the last payment you’ve made. You can also contact the creditor or contact you had with the creditor or check the options below:

  • Talk with your creditor and inform them you think the debt is statute-barred or prescribed, requesting them proof that it’s not. If the creditor responds with evidence of payment or written confirmation of the debt, you must start paying it.
  • Hope that the limitation period ends before your creditor decides to file legal action to the court. However, we do not suggest taking this option or risks. It is always best to communicate with your creditor and be honest with your current financial struggle. If you keep ignoring your creditor, they can possibly seek legal action against you. Moreover, ignoring a debt considerably raises the chances for a CCJ, decree, or money judgment.

Besides, even if your limitation period has passed, you can pay for your debt is you wish to do so. However, if you have other debts to settle, better do it first. Debts such as business and tax debts has to be taken seriously. You must be aware if how much you will be left and how much you can afford towards debt payments.

Can My Creditor Start A Court Claim When the Limitation Period Of My Debt Has Passed?

If your creditor takes legal matters after the limitation of your debt has passed, you can show the document as proof that your debt becomes statute barred or prescribed. If you don’t, the court won’t recognize the limitation period end date, dispensing a court order by then.

Depending on where you are and your type of debt, this is done in the form of a decree, CCJ, money judgment, or liability order. You can have this canceled at a later time but would merit additional expenses and costs.

Usually, court forms are complicated, even more, when you’re filling forms for a statute-barred or prescribed debt. There’s also a possibility that you might be attending court hearings if the court wishes to know more information.

Once you’ve passed the forms to the court demonstrating that the limitation period has passed, the creditor will counterpart in presenting proof. If your creditor can provide pertinent proof that the limitation period hasn’t passed, you’ll get a court judgment to pay off your debt. This proof could involve proof of payments or a copy of the letters you sent to your creditors.

In contrast, if the creditor can’t confirm any evidence that the limitation period hasn’t passed, their claim will be dismissed by the court. Thus, you are safe from getting a court order to pay off your debt.