If you borrow money which you then make no attempt to repay it is possible that after a period of six years (12 years for mortgage shortfall debt), the debt will become statute barred.

Once a debt has become statute barred the creditor who is owed the money can no longer take further legal action against you to collect it. As such they can no longer apply to the court for a CCJ against you, a charging order against your property or petition for your bankruptcy.

This rule is based around a law called the Statute of Limitations Act 1980. This Act sets out times scales within which action can be taken at the court for breaches of the law.

What action can a creditor take to prevent a debt becoming statute barred?

If you simply refuse to make any payment towards a debt that you owe, to prevent it from becoming statute barred the creditor is obliged to take action against you to collect their debt.

The first step they are likely to take is apply to the court for a County Court Judgement (CCJ). This is a court order specifically requiring you to pay the debt. At the point that a CCJ is issued, the six year clock starts again.

As such if you have not made any payments towards an unsecured debt for 5 years and then a CCJ is issued against you, the time which must then pass for the debt to become statute barred is a further 6 years.

Charging orders and earnings attachments

Having a CCJ against you does not in itself allow the creditor to enforce their debt. As such it is possible for you to simply ignore a CCJ for six years. After this time the debt becomes statute barred if the creditor has taken no further action to enforce it.

As such creditors will normally take further enforcement action of you do not pay a CCJ. If you are a home owner, they are likely to apply for a charging order against your property.

A charging order is extremely powerful. Once granted it secures the debt against your property. This charge then remains until such time as it is paid or the house is sold. Of course the house may not be sold for many years into the future. However the debt still stands and is protected from the state of limitations.

If you are not a property owner, the alternative remedy for the creditor is to apply for an attachment of earnings against you. This means that payments towards the debt will be taken from your wages before you get paid. The creditor may also use a bailiff to try and collect the debt owed.

Debt enforcement after a debt is statute barred

Once a debt has become statute barred the creditor who is owed the money is no longer allowed to enforce it.

In reality, the debt itself is not actually written off. It is still formally owed by you. However with no legal means to enforce it the creditor will generally never be able to collect the outstanding balance.

If a creditor does try to collect a debt which is statute barred either themselves or with the use of a debt collector this could be deemed as harassment under Section 40(1) of the Administration of Justice Act 1970.

Not informing creditors of your whereabouts

A creditor does not need to know exactly where you are to try and enforce their unpaid debt. Clearly if you are a home owner, the likelihood will be that the creditor will simply apply for a CCJ and charging order against your property. However debt collection does become more difficult if you are not a home owner.

If normal attempt to contact you and collect their debt fail, then the creditor can issue a CCJ against you at your last known address. However if you are not living at your last known address and the creditor has no details of your current address or employment it will be extremely difficult to then issue an attachment of earnings or use a bailiff against you.

It is possible for a creditor to apply to make you bankrupt when you are absent. However this would be extremely unusual in the case of commercial creditors such as banks.

As such if you hide from a creditor for six years from the date a CCJ was issued the debt will eventually become statute barred and you could avoid its repayment.

However if you are not in a position to pay a debt it is far better to consider a debt management solution to resolve the problem so that the worry of the creditor eventually finding you is not constantly hanging over you.

Use a debt management solution

If you are unable to repay what you owe, rather than hiding from the problem and worrying about whether it will finally catch up with you for six years or more, it is far more sensible to tackle it head on. This can be done even if you have no means to repay the debt.

There are various options available to you depending on your circumstances. These include a Debt Management Plan (DMP), Individual Voluntary Arrangement (IVA) if you can afford to make monthly payments.

If you have no means of making a payment towards your debt you might be better off considering Bankruptcy or a Debt Relief Order.

By using one of these solutions you will know that your debts will be paid in a sensible period of time or even taken away from you straight away once and for all.

You can then get on with your life without the worry of past debts constantly hanging over your shoulder. For most people this is a far more satisfactory solution than trying to avoid a debt for 6 years so that it becomes statute barred.