If you’ve had debts hanging over your for a long time, you may wonder if you still have to repay what you owe, especially if the creditor you owe money to hasn’t contacted you in a long time.
In the UK, debts that have bypassed their relevant limitation period are known as ‘statute-barred debts’, and in most instances you won’t have to pay any money once a debt is statute-barred.
In this guide we’ll explore what statute-barred debt is, how long it takes for a debt to become statute-barred, and whether your credit file can still be affected once a debt is statute barred.
What does statute barred mean?
The dictionary definition of statute barred states that when a debt is statute barred it is no longer legally enforceable owing to a prescribed limitation period having lapsed.
Put simply, it means that there comes a point when an old debt is no longer enforceable.
If a debt is statute barred it means that the creditor has reached a time limit to take certain action, such as court action, to force you to pay what’s owed under the Limitation Act 1980.
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What is statute barred debt?
A statute barred debt is one that can no longer be chased or recovered by your creditor due to regulations laid out by law.
The Limitation Act 1980 imposes a time limit that creditors must adhere to when attempting to recover what is owed. This is known as a limitation period.
If a debt has laid dormant for too long without payment being made or any acknowledgement of it then the amount owed is no longer liable to be recovered using legal or court action.
Will statute-barred debt appear on my credit file?
Unenforceable debt shouldn’t appear on your credit file, but there are certain instances where this may happen – if the original creditor defaults the account, for example.
The good news is creditors can’t take legal action against you to recover statute-barred debt.
That means a creditor can’t apply for a court order like a County Court Judgment (CCJ) against you.
That said, they can still explore other methods of recovery such as using private debt collection agencies.
You should always remember that any methods debt collectors choose to utilise are not be enforceable by law and they will have no legal power to force you into making payments.
This applies throughout most of the UK, the exception being in Scotland where the debt becomes extinguished and ceases to exist.
What’s the time limit for unsecured debts to become statute-barred?
Unsecured debts, also known as simple contract debts, include things such as credit cards, payday loans, catalogue repayments, personal loans, utility bills, council tax arrears, overdrafts, benefit overpayments, rent arrears and more.
There are some exceptions to this with some debts having different time limits to be aware of. Personal injury claims, for example, have a shorter limitation period of three years
The Limitation Act states that unsecured debts have a six year limitation period, in England, Wales and Northern Ireland.
There’s a shorter limitation period in Scotland at just five years, unless the court issues a decree to extend the duration .
The cause of action, which is when the time limit begins, is usually when your agreement says the creditor can take court action against you.
This can vary between agreements and for some this will be after a default notice has been sent and expired.
When the limitation period begins, an unsecured debt will typically be stature-barred if:
- The creditor hasn’t started a County Court Judgment to claim the debt (A County Court Judgment is a court action that forces you to repay outstanding debts and personal loans)
- You haven’t made a payment to the debt in six years
- You haven’t provided written acknowledgement of the debt to the creditor during the six year limitation period
How long can a creditor chase a secured debt for?
Secured debts are any debts that are secured against an asset like your home. If, for example, you fall behind on your mortgage and the lender repossesses and sells your home, the amount they raise may not be enough to cover the cost of the mortgage and other loans attached to the property.
This is known as a mortgage shortfall, a secured debt that has a different time limit attached to it before it becomes statute-barred.
Six or twelve years limitation period
Secured debts like mortgage shortfalls allow lenders an extended time limit of twelve years in which to recover the debt.
That means that it would take more than a decade for a default on a secured debt, like mortgage shortfalls, to become statute barred.
There is no limitation period applied if you owe money to income tax, VAT or capital gains tax owed to HM Revenue & Customs. They are entitled to chase any debt at any point in time.
This also applies to the Department for Work and Pensions applicable to benefit overpayments.
The DWP is entitled to deduct any arrears from your existing benefit payments without court action and without your permission.
When does the limitation period start on my debt?
The limitation period begins from the most recent date of any of the following:
At the time of the last acknowledgment of the debt
This should be a written acknowledgement that you have signed. It is also becoming acceptable that email can constitute written acknowledgment.
In the case of a joint debt written acknowledgment only applies to the party who wrote and signed the letter.
Acknowledgment of the debt also applies to any third party communication made on your behalf.
If you have utilised professional services from financial advice or debt management companies these are considered acknowledgment of the debt and negate the limitation period.
Any written correspondence from the creditor does not count as acknowledgement, nor does any telephone communication.
When contacting your creditor you must clearly state that you don’t owe the debt. By doing so you are refuting any claim they may be making in a manner that cannot be considered acceptance or acknowledgment of the debt.
At the time of the last payment towards the debt
The last payment by you, or by either party in the case of a joint debt, will count as the starting date of the limitation period.
Any payments made by a financial advisor, agency or debt management service or company will also count towards this option.
The earliest date court action could have been instigated
Depending on the type of debt, there will generally be a defaulting term laid out in the terms and conditions of the loan.
This could be after a specific number of missed payments or a specific amount of time that the debt has been in arrears. At such a point your creditor would have been entitled to commence court proceedings to retrieve the debt.
That could also be the date that the limitation period would start. The creditor must not have started court action at that time for the debt to be statute barred.
If court action has been instigated at any time during the perceived limitation period then the debt can never become statute barred or extinguished.
For types of debt other than typical loan options, for those without specific terms and conditions, then the beginning of the limitation period can be difficult to determine. You should seek guidance in establishing the exact date and if the debt is still active.
What is a default notice?
A default notice is a letter from your creditor warning that you’re behind on payments towards your debt.
Under the Consumer Credit Act 1974, if you break the terms of your credit agreement, your creditor must send you a default notice before taking certain kinds of action – including issuing County Court Judgments.
You must receive a default notice before your creditor demands you payback everything you owe rather than just the arrears or terminating the agreement.
The default notice should give you at least 14 day repay the arrears.
Paying the arrears usually prevents the creditor taking further action. However, if you ignore the default notice and it expires, the creditor can pursue action.
If you receive a default notice and you can’t afford to repay your credit debts, you should seek debt advice immediately.
Why choose Creditfix?
- Write off unsecured debts over £5,000
- Stop interest and charges soaring
- Reduced payments from £85 per month
How do I know if my debt is statute barred?
By payment into the debt
You must not have made any payments towards the debt during the limitation period.
By written confirmation of the debt
You must not have written or emailed your creditor acknowledging the debt during the limitation period.
By legal action
Your creditor must not have already begun legal proceedings by issuing a County Court Judgement against you during the limitation period.
If you’re unsure whether your debt is statute barred you should seek debt advice as soon as possible.
You should avoid making any payment towards the debt until you have spoken to an expert. That’s because if you make a payment before seeking debt advice you will discredit the limitation period and become responsible for the debt again.
While in this situation it is essential not to acknowledge the debt, you may ask the creditor to provide proof that the debt is accountable for according to the Limitation Act.
It is the creditor’s responsibility to prove the debt is still active, not yours.
Use the template letter at the end of this article to renounce the debt and make sure you send it by recorded delivery, as you may need proof of when it was sent and you should also keep a copy of the letter for reference.
Never include any other contact details other than your postal address for correspondence. This will ensure you always have written evidence of all communication.
Why choose Creditfix?
- Write off unsecured debts over £6,000
- Stop interest and charges soaring
- Reduced payments from £110 per month
What should I do if my debt is statute barred or extinguished?
Nothing. If you’re certain the limitation period is complete and your creditors haven’t contacted you regarding the debt then you can ignore the debt and carry on with your life unaffected.
What if creditors are still requesting payment?
If your creditors have contacted you regarding repayment or are seeking acknowledgment of the debt the first thing to confirm the debt is definitely statute barred.
You can do this by checking your credit report. Any outstanding debt will be referenced there.
You can also check your bank statements to confirm the last time you made a payment toward the debt.
If you’re certain that the debt is now statute barred you are entitled to take no further action.
If you’re still not sure whether the debt has become statute barred then you can write to the creditor using the template letter shown at the end of this article asking them to provide proof that the debt isn’t statute barred.
If they can provide written proof that you have made a payment during the limitation period or that you have acknowledged the debt then you must start making repayments or find an alternative method of meeting their demands.
It’s important to remember that you you shouldn’t feel obligated to pay more than you can realistically afford.
There are a variety of ways to manage debt and talking to a specialist debt management company will certainly help.
They can guide you in finding the most appropriate and affordable way to handle any debt problems in line with your current income and outgoings.
If your debtors continue to pursue you after the limitation period has passed you may be able to receive help from the Financial Ombudsman.
If you choose to seek their assistance you must be able to present all relevant paperwork for the debt in question and any proof relating to the statute barred legislation.
What can a creditor do after the limitation period has passed?
Once the limitation period has passed the debt becomes statute barred and the creditor has no legal power to recover the debt.
If you have made it clear that the debt is now statute barred your creditor should stop contacting you.
If the creditor isn’t regulated by the Financial Conduct Authority then they are still entitled to contact you and chase the debt through any alternative methods available to them.
Can a creditor start court action after the limitation period has passed?
Yes. However, if the creditor begins proceedings after the limitation period has passed then you can use the fact that your debt is statute barred as your defence against the case. If the debt is proved to be statute barred then the court will cancel the case immediately.
If you receive any paperwork from the courts regarding legal action it is imperative you respond and return it on time.
Once you have returned the required paperwork it is up to the creditor to provide evidence to show the debt isn’t statute barred according to the rules laid out by Limitation Act.
If they can’t prove the limitation period hasn’t passed then the court action will be rejected and cancelled. If they can prove the debt is still active then the court action will continue and you will be liable for any judgement sanctioned in order to repay the debt.
If you fail to reply to the court’s initial request they will hold no reference to the debt’s limitation period and that the debt has become statute barred.
Without this they will continue to process the court order and pursue further action. This could come in the form of a liability order, a County Court Judgement or alternate method of debt repayment.
You may be able to refute and cancel the proceedings but these types of legal matters can prove difficult without professional guidance and often incur additional court fees you may be liable for. It will save you a great deal of time and money to reject the application as soon as you receive initial notice of proceedings.
Statute Barred Letter Template
The following letter template can be used to reject applications of payment on a debt you believe to be statute barred or to request proof from your creditor to the contrary.
When contacting your creditor make sure you keep a copy of your letter and always send by registered post.
(Add account number or debt reference number)
I do not admit liability for this debt, and I do not intend to make any further payments to it for the following reasons:
- The earliest point at which you could have sued for the full balance owing to this debt was more than six years ago.
- No payment has been made to this debt by me, any joint account-holder, or any third party acting as my agent for a period of more than six years.
- No written admission of liability for this debt has been made by me, or any third party acting as my agent for a period of more than six years.
This debt is therefore statute barred and any court claim to recover it will be defended on this basis. If you have evidence that this debt isn’t statute barred, please send it to me within 21 days. Otherwise, please confirm in writing that you won’t pursue me further for this debt.
(Add your signature)