If a debt has become statute barred it can no longer be legally enforced by the creditor. In other words you no longer have to pay it.
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The rules in Scotland are different. Most unsecured debt becomes statute barred in Scotland after 5 years. However there are more exclusions.
What is Statute Barred Debt?
If a debt is Statute barred (also known as time barred) it can no longer be legally enforced. From that point on the creditor is prevented from taking legal to collect the money owed.
In England and Wales the rule is governed by The Limitation Act (1980). The Act provides the rules regarding the timescales within which legal action can be take to enforce a broken contract. The non payment of a debt is caught by these rules.
After a debt has become statute barred court action cannot be taken to collect it. The creditor is no longer allowed to apply for CCJ, Attachment of Earnings, Charge against property or to petition for bankruptcy. In other words it does not have to be repaid.
Statute barred debt is not written off. It is unenforceable but remains outstanding. As such the creditor could still recover it if other funds become available that can be off set against it.
When does debt become Statute Barred?
If you live in England, Wales or Northern Ireland most unsecured debts become statute barred after 6 years from the date the creditor has a cause of action. In other words from the point when they could got to court to try and enforce payment.
There are some exceptions. Most notably a mortgage or secured loan shortfall does not become statute barred until it has not been paid or acknowledged for 12 years.
If a creditor uses a debt collecting company to try and collect such a debt it is considered to be harassment. Writing a correctly worded letter both to the collector and original creditor will stop this action.
Some debts can never become statute barred. These include income tax and VAT owed to HMRC and CSA arrears.
Can a creditor stop a debt becoming Statute Barred?
If you are not paying your debt the only way a creditor can prevent it from become statute barred is to take legal action against you before the 6 year period is up.
Normally they will need to apply for a CCJ (County Court Judgment) against you. On the date the Judgment is issued the time period is then extended for a further 6 years.
The debt can still become statute barred if you do not make further payments or acknowledge it within the 6 year extension. This can only then be prevented if the creditor subsequently gets a charge against your property or an attachment of earnings.
If your debt becomes secured with a charge against property or an attachment of earnings is put in place it cannot then become statute barred.
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