Should I keep paying an old debt?

People often ask if they have to carry on making payments to an old debt. This can happen as it’s too easy to get stuck in a long-term Debt Management Plan (DMP), paying little each month so the debts will take forever to repay.

This article looks at questions about debts in long-term debt management.

Do I have to pay a debt that has dropped off my credit file?

A debt drops off your credit file six years after the default date. Most debts in a low payment DMP will have been defaulted (if one of yours hasn’t, read What should the default date for a debt be? because you may be able to get this changed) so after six years these literally disappear and your credit score improves.

But these debts still exist. Even though they are old, they will never become “statute barred” (that is the legal term for a debt that is too old for a creditor to enforce – see When is a debt statute barred? for more details) because you are making payments to them. So if you don’t want hassle from the debt collector that owns the debt,  and then possibly CCJs, bailiffs etc, then the answer is Yes, you do need to keep paying the debt.

If the debt is very old, the documentation may be missing

There is another possibility for really old debts that is worth exploring. If the debt is a consumer credit debt – that is all types of loans, credit cards and catalogues but not including overdrafts – then the debt collector may not be able to produce correct Consumer Credit Act documentation.

This is most likely to happen for debts that were started before 2007. If they can’t, then they can’t take you to court for a CCJ and you can simply stop paying…

This National Debtline factsheet explains how to ask the debt collector to send you the CCA agreement. And National Debtline are good people to talk to if you are sent something and you aren’t sure if it is correct or complete.

Am I likely to get a CCJ for an old debt?

If you carry on paying, it is possible that you could get a CCJ. This may feel unfair – you have had a long-term arrangement with your creditor and you have kept your side of the agreement by making monthly payments – but legally the creditor can still get a CCJ.

However, your debt is costing very little to administer anymore so the debt collector will often prefer to carry on getting small amounts of money from your DMP each month to the expense of taking court action.

If your debt is sold to another debt collector, they may decide to look again at your credit file and your income and expenditure. If you don’t supply these details the new debt collector may decide you could be paying more and go for a CCJ.

You are a bit more likely to get a CCJ if you have a house – a creditor can see from your credit file if you have a mortgage and may assume that equity has built up. The odds are that you won’t, but having a long term DMP with a house with a lot of equity can be a problem.

If you stop paying the debt, then it is much more likely the debt collector will go for a CCJ. Think of your creditor as snoozing quietly whilst your small monthly payments roll in – as soon as they stop, he is likely to wake up and rethink what to do!

Recently the number of CCJs has increased a lot – up to 320,000 in January-March 2019. Half of these CCJs were for less than £650, so don’t think your debt is too small for a debt collector to go to court!

If I get a CCJ will the debt reappear on my credit file?

After a debt has dropped off it will never come back. But this isn’t good news because the CCJ itself will show on your credit file for six years, even if you settle it in full. (There is one an exception here – if you pay a CCJ in full within 30 days it will disappear.)

Is it a good idea to negotiate Full & Finals on these debts?

Definitely! Even if paying £5 a month to a debt doesn’t feel like much of a problem, it is always possible the debt collector will threaten court action and ask for more.

If a final settlement is agreed, the debt will not reappear on your credit file. A Guide to Full and Final Settlements has more information, including how to make an offer. If your debts have changed hands several times, the current creditor may have paid very little for the debt, possibly only pennies in the pound. But it’s not easy to say what you should offer – that will depend on:

• what you are currently paying – if the debt will be repaid in four years the creditor isn’t going to be interested in a 20% offer;
• what you could afford to pay – it will help to get an offer accepted if you provide an Income& Expenditure sheet that shows you can’t afford to increase your monthly payments;
• whether you may have a house with equity – this doesn’t mean a F&F will be refused, but it makes it less likely that a very low one will be agreed.

Where could you get the money for a F&F? One idea that may work if you have had a lot of debts, especially high cost debts, is making an affordability complaint.

If you already have PPI complaints underway, they could also help. But it’s now too late to start a new one.