What is Statute Barred debt?

In England, Wales and Northern Ireland a debt becomes Statute Barred, meaning that it’s no longer enforceable through the courts, if there’s no communication between the debtor and the creditor for a period of six years. This is stated in the Limitations Act of 1980, which rules that all creditors have a fixed period of time in which they can pursue the debtor for what they owe via court action.

This means that any unsecured debts you might have with your creditors, like credit cards, overdrafts, store cards and bank loans will become unenforceable after a period of six years if the following conditions are met:

• You or anyone else owing the money (on debts in joint names) hasn’t made a payment on the debt during the last six years.
• You haven’t written to the creditor acknowledging you owe the debt in the last six years.
• The creditor hasn’t taken out a CCJ against you to recover the debt in the last six years.

The six year limitation re-starts whenever you write to the creditor acknowledging that you owe the debt, or make a payment on it. There are also some debts which can’t be Statute Barred, or are subject to different limitations. These include:

• Mortgage shortfalls: – If your property is repossessed, then your creditor may begin chasing you for a mortgage shortfall. This will only become Statute Barred after 12 years for any outstanding capital and after 6 years for the arrears of interest
• Benefit overpayments: – If you’re a debtor to the Department of Work and Pensions (DWP) then you can be chased for these debts without going to court; the DWP will reclaim any overpayments by deducting them from current benefits. The limitation period otherwise for overpayments is 6 years from when a final decision is made by the DWP, Council or Tribunal
• Income tax and VAT: – There’s no time limit for these debts to be chased; you can always be pursued for debts owed to HM Revenue and Customs. National Insurance would be subject to a 6 year time limit
• Personal injury claims: – These have a much shorter limitation period of three years.
• County Court Judgments: – If the creditor has previously taken you to court and received a County Court Judgment, then you won’t be able to use the Limitations Act 1980 to dispute the debt. If the Judgment is over 6 years old, the creditor may need the permission of the court to enforce the debt.

So what should I do if a creditor chases me for Statute Barred debt?

It depends on how your creditor plans to chase you for the debt. As long as your lender is regulated by the Financial Conduct Authority (FCA), they’re not legally allowed to chase you for the debt via court action.

In the event that a creditor calls you and tells you they plan to take you to court regarding a Statute Barred debt, you should politely tell them that the debt is no longer enforceable through the courts under FCA regulation, and ask them not to contact you about it again. You should start any letter to the creditor by saying you do not acknowledge that you owe this debt, you believe it to be Statute Barred.

Will I ever have to pay these debts?

Whilst the FCA regulation mentioned above protects people from court action after a period of six years, this doesn’t mean that the debt is gone. Although no longer enforceable via court action, your creditor is within their rights to pursue you for the debt through other means, like debt collectors, for example.

If you’ve got a debt that’s Statute Barred and you’re still being chased for it, why not give us a call? One of our debt solutions, like an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP) could see you make a single, affordable monthly repayment on your debt over a period of years, meaning that you get your creditors off your back and pay your debts back in a way that allows you to live comfortably.

How does Statute Barred debt affect my credit file?

You won’t have a Statute Barred status on your credit file, but you may have some negative markers associated with the account still on your credit file. What’s more, if your credit file is checked by the debt collection company looking to recover a Statute Barred debt, this will leave a search footprint on your credit file and negatively affect your credit score.

As you probably know, your credit score is the first thing that your lenders will look at when they’re considering whether or not to lend you money, so it’s important to keep it as high as possible. If you’re worried about your credit score and want to improve it, why not read our piece on how to improve your credit score?

I’m not sure if the limitation period has expired– what should I do?

Six years is a fairly long time. If it’s been a number of years since you paid money on a debt or made any acknowledgement that you owe it, it’s understandable that you might not be quite sure if the debt has actually become Statute Barred or not.

In this situation, the best thing that you can do is to check your credit file. This will give you a reliable record of payments you’ve made on debts, and should tell you whether or not your debt has become unenforceable via court action or not.

Can debts become Statute Barred if I live in Scotland?

Slightly different laws apply in Scotland when it comes to debts becoming unenforceable. Under the Prescription and Limitation (Scotland) Act 1973, debts will become extinguished, meaning that they no longer exist at all, if enough time elapses. The conditions for a debt becoming extinguished are:

• You haven’t written to the creditor admitting that you owe the debt in the last five years.
• The creditor in question hasn’t already obtained a decree (court order) against you.
• You or anyone else owing the money (on a debt in joint names) hasn’t made a payment on the debt in the last five years.

Similarly to in England, Wales & Northern Ireland the rules above only apply to unsecured debts like credit cards, personal loans, store cards, catalogues and utility arrears. There are some different rules where other types of debt are concerned – these include:

• Court decrees:- Because a court decree is a money judgment made by the sheriff’s court that you owe a creditor a sum of money, it’s unlikely that you’ll be able to write the debt off until 20 years
• Council tax:- The time limit for council tax arrears to be collected is 20 years.
• Benefits:- If you’ve received a benefit overpayment then the Department of Work & Pensions (DWP) will have 20 years to recover these.