Did you know that creditors only have a certain amount of time in which to raise a court action against you if you haven’t paid an old debt? It all comes down to what’s called ‘statute barred debt’. Here’s everything you should know.
What is statute barred debt?
If you don’t pay your debts, creditors can take enforcement action against you. In other words, creditors can take you to court. However, creditors can’t wait forever to take action. Thanks to the 1980 Limitation Act, if creditors don’t raise a court action within a certain amount of time, the debt becomes unenforceable or barred by law, making it statute barred debt.
- The debt still exists, but creditors can’t do anything to recover it.
- This law only applies in England, Wales and Northern Ireland. In Scotland, we talk about ‘prescribed’ debt instead.
- In Scotland, once a debt prescribes, it doesn’t actually exist anymore.
Note that some debts never go away. For example, HMRC can keep chasing income tax payments without any time limits.
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What are the time limits for statute barred debts?
The time limits vary slightly depending on the type of debt and where you are in the UK. But wherever you’re based in the UK, the clock usually starts ticking from the day the creditor can legally enforce payment action against you. For example, this might be the date you received a default notice, or when you write to the creditor acknowledging the debt.
Let’s break down the various time limits.
Scotland
Put simply, most creditors have five years to raise a court action against you, but some exceptions apply.
- It’s 20 years for chasing some benefits overpayments and council tax arrears.
- If the creditor raises a court action against you within the time limit, the case can never become prescribed.
Rest of UK
In England, Wales and Northern Ireland, creditors usually have six years to raise an action against you. However, there are some exceptions.
- Mortgage payments: 12 years
- Council tax arrears: 20 years
Again, if the creditor raises a court action in time, the case can never become statute barred.
How do I check if a debt is statute barred?
Not sure if a debt is statute barred? Here’s what you can do:
- Identify the last time you acknowledged the debt. This could be the date the ‘clock’ started running.
- Telephone the creditor and ask for details of the debt. Don’t write to them, because this might make it look like you agree to the debt. By acknowledging the debt now, there’s a risk you’ll ‘reset’ the clock and the debt will no longer be statute barred.
- If they can show you still owe money and it’s not statute barred, you need to repay it. If the debt’s out of time, you can use this as a defence.
It might be tricky to work out the exact date, so contact Citizens Advice if you’re not sure what to do next, or if you don’t want to talk to creditors yourself.
What if a creditor still wants to reclaim the debt?
This is where it gets a bit complicated.
If your creditor’s still chasing payments, but you know the debt is statute barred, there are three things you can do:
- Get a copy of your credit file
- Check whether the creditor has raised a court action (CCJ) against you. The time limits might not apply in this case and it’s wise to get legal advice immediately.
- Write to your creditor. Explain you don’t admit liability for the claim, and you won’t make any payments because it’s statute barred. It’s really important you phrase this letter a certain way – charities like StepChange have special template letters to help.
Get legal help right away if you’re unsure how to proceed.
Do statute barred debts affect my credit score?
They can, yes. Just because you’re no longer paying the debt doesn’t mean it doesn’t stay on your credit report.
If a statute barred debt is still on your credit file, you might find it harder to get credit like a personal loan or a mortgage in the future. Why? Because lenders use credit reports to judge your ability to repay debts, and any statute barred debts might indicate financial difficulty.
Contact Citizens Advice if you’re worried about the impact of a statute barred debt on your credit history.
Takeaway
Do you think a debt is statute barred? Consider financial advice as soon as possible to learn more about your options, especially if a creditor’s still chasing you for payment.
Finally, remember that even if a debt is statute barred, it doesn’t simply ‘go away’. It just means the creditor can’t take you to court or make you pay it. There’s still a chance that the debt will affect your credit score. It’s a good idea to request a copy of your file from a credit reference agency to check.
