Statute Barred Debt

Statute Barred Debt

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 debt can no longer be statute barred. There is no limit to the time that a creditor can enforce a CCJ.

After a CCJ has been issued the creditor can then take further enforcement action against you if you do not pay the debt. This includes applying for an attachment of earnings from your wages or a charge against your property.

If a CCJ has been issued and enforcement action has not been taken within 6 years the creditor will then need further permission from the court before then can then start enforcement action. The judge will only agree if the creditor can give a good reason for why no action was taken in the past. Such a reason could be they claim the debtor has eluded all attempts to trace them.

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