If you have an old debt, you may wonder if you still have to pay it – can your creditors really take you to court after this long?
The law only gives a creditor a limited amount of time during which action can be taken against you. The legal term for a debt that is so old that it can’t be enforced in court is “statute barred”. This article answers the most common questions people have about it.
NB If you are making payments the debt will never become statute barred no matter how old it gets. In this case, this article isn’t relevant, instead read Can I stop paying this old debt?
Why does “statute barred” matter?
If you aren’t making any payments to a debt, the creditor has got to take you to court within a certain time which is set out in the Limitations Act 1980.
For most unsecured consumer debts in England and Wales such as credit cards and loans, this time is six years from the point at which you failed to make a payment. If the creditor doesn’t start court action within this time, the debt is not enforceable because it is statute barred.
When a debt is statute barred it still exists legally, but because you cannot be taken to court for it, you do not have to make any payments to it. The Financial Conduct Authority’s rules about statute-barred debt are here.
How can I tell if my debt is statute-barred?
Unsecured loans and credit cards will normally be statute barred in England and Wales if:
- it had been more than six years since you missed a payment; and
- you haven’t had any contact from the creditor during this time; and
- the creditor hasn’t gone to court for a CCJ for the debt.
If you have had some contact but haven’t made a payment or acknowledged in writing that you owe the debt, the debt should still be statute barred. If you have reclaimed PPI, this is likely to count as acknowledging the debt.
With a joint loan, the six years runs from the last point either you or the other debtor made a payment to it. If you have split-up, you may think a debt is statute barred but actually it isn’t because your ex has made a payment to it.
The situation is more complex for overdrafts and any other forms of debt where there was no set repayment period in the contract – contact National Debtline for advice about these.
Determining the exact date on which a debt becomes statute-barred can be complicated, see this factsheet: When Does the Limitation Period Start Running? Sometimes the exact date matters:
- if you write saying that a debt is statute-barred and you are wrong because the debt isn’t, then your letter is likely to have “reset the clock” by acknowledging the debt;
- if you have received a court form about a debt, you need to know whether you can defend the case on the grounds the debt is statute barred.
I suggest you call National Debtline on 0808 808 4000 and talk through your situation with them.
Secured debt – mortgage shortfalls
For a debt resulting from a mortgage shortfall, the time allowed in the Limitations Act is twelve years. Many lenders however follow the old Council for Mortgage Lenders code which is now incorporated into MCOB (Mortgage Conduct of Business Rules) which says:
anyone whose property was taken into possession and sold more than six years ago, and who has not been contacted by their lender for recovery of the outstanding debt, will not now be asked to pay the shortfall.
See National Debtline’s Factsheet on Mortgage Shortfalls for more details, such as what does “contact” mean? And phone National Debtline if you are contacted about a mortgage shortfall debt which is between 6 and 12 years old.
My debt is statute barred, do I still owe the money?
Yes. Your debt still exists, it hasn’t been written off, it can still get sold on and you may still receive letters about it.
If you want to get rid of the debt completely and you are absolutely sure a debt is statute barred, you could consider making a very low Full and Final Settlement offer, under 10% – see Full & Final Settlements for more details. Your letter should point out that the debt is statute barred and hence unenforceable.
A debt has dropped off my credit record – is it statute barred?
The six year period for the Statute of Limitations is NOT the same as the six year period that a debt stays on your credit file after a default. If a debt isn’t showing on your credit file it may be statute barred but it may not be. A debt will stop showing on your credit record six years after any default was recorded. If you made any payments to it that “resets the clock” so the six-year limitation period starts again after the most recent payment/acknowledgement.
A typical example: Mrs H is in a long-term debt management plan. Initially she only made token payments. After a few years she increased her payments and now, after seven years, she has about two years to go. Her debts will already have fallen off her credit record as it is more than six years since defaults were added to her accounts, but as she is making payments each month they are not statute barred.
My debt has been sold, does this effect becoming statute barred?
No, it doesn’t matter if your debt is sold. The six year period still runs from the date of your last payment or written acknowledgment of the debt, the sale doesn’t “reset the clock”. If it was already statute barred at the time it was sold, it remains statute barred.
Can I ignore a letter about a statute barred debt?
Are you absolutely sure that it is statute barred? If you aren’t certain, then you should probably write a “Prove It” letter to your creditor. This is worded so that it doesn’t acknowledge the debt.
If you are 100% certain it is statute-barred, you could ignore a letter, but it might be less stressful to reply pointing out that it is statute-barred, otherwise the next letter you get may be a court form about a CCJ. Here is a template letter you could use:
Can I ignore court papers about a statute barred debt?
No. If you ignore the Claim Form, a judgment will be made against you “in default” because you haven’t replied, even if your debt is statute barred. So if the creditor takes you to court, you must defend the claim on the grounds that it is statute-barred. If you are unsure what to write on the defence form, phone National Debtline and talk to them.
Can I just wait for my debts to become statute barred?
If creditors haven’t contacted you for a few years, you may be hoping that they have forgotten about the debt, so you can get through to the six-year point. This may work, but it is common to find after a while that the letters start again. This may be when your debt is sold to another debt collector, or it may be when you are just a few months away from the statute barred point.
It’s hard to get through life without the credit reference agencies knowing where you are these days, so hoping your creditors can’t find you rarely works.
If you still have money problems and have more recent debts that you are also struggling with, then you should be looking at the bigger picture as even if the older debts become statute-barred, that won’t help a lot,so look atA Road Map of Debt Options.
Find out more about this situation in No calls or letters about a debt for years?
Can I ignore letters when it’s a few months before six years?
This isn’t a good idea. The creditor just has to start court action before the 6 year point – they don’t have to actually get a judgment before that point.
If you aren’t sure whether the debt is yours, whether it is for the right amount or whether it might be statute barred, then best thing is to reply with a Prove It! letter. But if you know the debt isn’t statute barred and you do owe the money then read Threats of Court Action – Are Debt Collectors Bluffing?
When does a CCJ become statute barred?
It never does. But if the creditor hasn’t taken any enforcement action in six years, they will need to apply to the court for permission if they want to enforce the debt by using bailiffs. This is unusual but if it happen to you, contact National Debtline.
Do tax debts or benefit overpayments or council tax arrears become statute barred?
Tax debts such as Income tax and VAT do not become statute barred. If you are wondering if your debt is a “tax debt”, HMRC has a list of “not tax debts”, which do become statute barred.
The situation regarding benefit overpayments is more complicated – although they can become statute barred, there are other ways the debt could still be recovered. You should take advice about these sorts of debts – contact National Debtline or your local Citizens Advice Bureau.
A council should not go to court and ask for a liability order for council tax arrears more than six years after the council tax became due. But if the council already has a Liability Order, this will never become time barred. If you get a letter out of the blue about a Liability Order for council tax arrears from ten years ago, this may feel very unreasonable. One of the main reasons time limits exist is that people don’t keep paperwork forever, so you may have no way of proving that you paid the debt at the time. This is one of the rare occasions when it may be worth asking the creditor to Write-off the Debt. It may also be worth getting a local councillor involved for council tax arrears.
My debt is statute-barred, if I reclaim PPI will this re-open the debt?
Once a debt is statute barred this is permanent, it can never become “unbarred” so applying for a PPI reclaim won’t change this. It is therefore safe to reclaim PPI on a statute barred debt. BUT if the reclaim is successful, the lender will sometimes not send you the money but set it off against the remaining debt – even though it is statute barred the debt still exists.
Any other questions?
I can’t give you advice on whether your debt is likely to be statute barred, so if you are concerned about a specific debt, then phone National Debtline. But if you have a general question about statute barred debt, then you can use the comments below to ask it.
*** updated 2017 – article extended and links updated