What is a Statute Barred Debt?
If you have debt which has been outstanding for some time, with no payments made nor communication from you towards the creditor, the debt can become statute-barred. Such debts are not enforceable by court action.
Consumer credit contracts have a use-by date. After a particular timescale (the limitation period) and certain conditions, the debt or contract can no longer be enforced. The limitation period depends on the type of debt.
This is set out in The Limitations Act 1980 (heavy reading).
Changes (or clarifications) to when the timer or limitation period starts were made by a Court Judgement in Jan 2019 (heavy reading).
These revised conditions are;
- it had been more than six years since you last made a payment; and
- you haven’t acknowledged the debt in writing during this time; and
- the creditor hasn’t already gone to court for a CCJ; and
- the creditor had a cause of action more than six years ago
Breaking points 1, 2 or 3 ‘resets’ the timer.
There are some exceptions.
- the limitation period for mortgage arrears is 12 years, but six years for mortgage interest
- debts owed to HM Revenue and Customs have no limitation period
- personal injury claims generally have a limitation period of three years
When does the limitation period start?
This six-year period begins when the creditor has a cause of action – this is the point at which the creditor could go to court for the debt.
You can’t be sued you for a debt without good reason to – which is a cause of action. This “good reason” depends on the type of debt and how it is regulated.
This is complicated for some debts such as overdrafts which don’t have regular repayments. Say you have an overdraft for a bank account you no longer use, but your bank may realise this for a long while – so when would they have the right to sue you?
A creditor’s cause of action does not start for some credit debts (including some loans and credit cards) until the creditor has issued a Default Notice. The problem here is that you may not remember when, or if, one was issued. Also, the creditor can just delay sending you this so your debt may never become statute-barred.
If you write saying that debt is statute-barred and you are wrong then your letter is likely to have “reset the clock” by acknowledging the debt.
Dealing with Debt Collectors and Debt Purchasers
Some companies may want to try and mislead you into thinking that your old debt can be legally recovered when it can not.
A debt purchaser is a company who buys bad debts, hoping to collect more than they paid and to therefore to make a profit.
Despite what the law states some are refusing to give up on these statute-barred debts. They will pursue by mail and phone people intent on making money.
If the debt you have to meets the conditions above, the collectors have no legal right in pursuing you. If you are being pestered for an old debt that you believe is Statute Barred there are certain things you can do to stop them, these are:
- Establish whether or not there are any Judgments made against you, to do this check your personal credit report.
- Under the Data Protection Act 1988 you can also request a copy of any files the company has. You must remember however when writing to the creditor state clearly that you are in no way acknowledging the debt.
- You can complain to FCA who will investigate the complaint and if the company is found guilty they could be deemed unfit to hold a consumer credit license.
Is a statute-barred debt written-off
No, your debt still exists. It hasn’t been written off by virtue of being statute-barred. It can still get sold on and you can still receive letters about it.
The FCA says that if you state you will not pay a statute-barred debt, the creditor cannot continue chase payment.
If you want to absolve yourself of debt completely and you know for sure is it statute-barred, you could make a token full and final Settlement offer, perhaps under 10%. Your letter should point out that the debt is statute-barred and hence unenforceable.
A debt is no longer on my credit record – is it statute-barred?
Maybe, but don’t take that as evidence.
The six-year period for the Statute of Limitations is NOT the same as the six-year period that a debt stays on your credit file after a default.
A debt may stop showing on your credit record six years after any default was recorded. But if you have made some payments to it in the last 6 years, perhaps just a token £1 a month, then it isn’t going to be statute-barred.
My debt has been sold, does this change anything?
No, it doesn’t matter if your debt is sold. The six-year period still runs from the date of your last payment or written acknowledgement of the debt.
The sale doesn’t “reset the clock”. If it was already statute barred at the time it was sold, it remains so.
When does a CCJ become statute-barred?