A statute barred debt is one that can no longer be legally enforced. It is sometimes referred to as time barred debt. After a debt becomes statute barred the person or organisation it is owed to can no longer take legal action to recover it. In affect the debt has to be written off.
When do debts become Statute Barred?
The majority of unsecured debts become statute barred 6 years from the date you last acknowledged or paid them. As such if you borrowed money but you have not made any repayments for the last 6 years the debt may well then be classed as statute barred and unenforceable.
BMD Tip: If during the 6 year period you confirm that you owe the debt or make a payment towards it however small the clock is reset. You will then have to wait another 6 years for it to become statute barred. Simply admitting that you owe the debt will be enough to restart the 6 year time clock.
In England and Wales the law governing Statute Barred debt is called the Statute of Limitations Act 1980. In Scotland it is the Prescription and Limitation (Scotland) Act 1973. The rules regarding how long it takes before a debt becomes statue barred in Scotland are different.
Can any debt become Statute Barred?
Some debts do not become statute barred after 6 years. For mortgage or secured loan shortfalls it takes 12 years. Other debts can never be statute barred. These include Income Tax and VAT debt owed to HMRC. In addition CSA arrears incurred after July 2006.
Council Tax debt and Benefits overpayments can generally become statute barred. However if you have been overpaid benefits the payment authority will normally recover these from any future payments you are entitled to. They can do this even after 6 years as they do not need to go to Court to do so.
Normally most creditors will take action against you to collect the debt that they are owed before enough time has passed to allow it to become statute barred.
Can Creditors stop debt becoming Statute Barred?
The first action a creditor can take to prevent a debt becoming statute barred is to apply for a County Court Judgment (CCJ) against you. The time before a debt can become statute barred is reset to 6 years from the date a CCJ is issued.
If you still do not repay the debt the creditor can then take further action against you to collect what they are owed. Normally they will apply for an attachment of earnings against you or a Charging Order against your property. Once issued the charge will remain in place for as long as it takes for you either to repay the debt or for the house to be sold.
The ultimate remedy for a creditor if you are not paying what you owe them is to apply to make you bankrupt. Most commercial banks are unlikely to take this action. However if you owe money to HMRC the threat of bankruptcy is very real and should not be ignored.
Should you wait until debts become Statute Barred?
If you have debts that you are unable to repay it is not sensible to try and wait until they become statute barred. It is more than likely that your creditors will take enforcement action against you within 6 years.
Having said that if you had a debt which has somehow been forgotten and more than 6 years have passed since you have heard anything about it then it is extremely likely that it will have become statute barred.
As such if you receive a letter out of the blue from the creditor demanding payment for an old debt which you have not heard about or made a payment towards for 6 years it is highly likely that you will not have to pay it.
hi I have recently dealt with HMRC and was told I had to pay half the debt owed this was the first letter I ever received from them but the harassment and the threats made me pay half the debt I asked them for a break down of so called missed tax credit payments and forms for a refund I have informed the credit card company of this and have filled out and posted them back I feel stupid for paying
I had an old credit card debt, it was from 2003. Lowell tried to take me to court for the full amount. The credit card company told me it was archived as so old. Lowell had no original credit agreement, card company sent me letter to that effect, lowell did not even turn up in court as I submitted my credit card letter stating archived, lowell only had a copy, assignment, not valid in court case was thrown out, that was 2013, so stated barred and case dissmised.
Go for it people, always defend, as these debt collectors have no legal original docs and no statement off account, and as mine was 10 yrs old and archived they could prove nothing, and it didn’t live it in court. And as these sister debt collectors pay a couple of hundred on a say £3000 debt, they have no prove. They hope you don’t know that and fear and bully but it’s you in control, in court documents are king, so the debtor has more power.
Hi Susan
Thanks for sharing. That is a great positive story.