If you have debt that you haven’t acknowledged or made payments towards for a number of years, there is a good chance it could be statute barred.
But what is statute barred debt and how long do you have to wait until a debt becomes statute barred?
In this guide, we’ll tell you everything you need to know about statute barred debt including what statute barred debt is, how to check if a debt is statute barred and why you could still be chased for statute barred debt.
What is statute barred debt?
In England, Wales and Northern Ireland, statute barred debt is debt that is no longer legally enforceable through court action because the creditor failed to take action within the specified timeframe.
This, essentially, means the creditor has run out of time to take legal action to recover the debt and, because of this, you are no longer required to repay the money owed under the Limitation Act (1980).
In Scotland, when no action has been taken against a debt within a certain time, it becomes prescribed which, technically, means it no longer exists and there’s nothing the creditor can do to recover the money owed under the Prescription and Limitation (Scotland) Act 1973.
However, whilst your creditor no longer has the legal power to force you to repay statute barred debt, the debt still exists.
This means it might still appear on your credit file and your creditor can still attempt to recover the debt through alternative methods, such as a private debt collection agency.
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What debts can be statute barred?
It can be difficult to know what debts can be statute barred but, generally, most unsecured credit debts, or simple contract debts, can be statute barred. This includes:
- Personal loans
- Payday loans
- Credit cards
- Store cards
- Overdrafts
- Store cards
- Benefit overpayments
- Catalogue repayments
- Council tax arrears
- Utility arrears
When does a debt become statute barred?
If you are being chased for a debt, there is a time limit within which a creditor can legally take court action for the money recoverable before it becomes statute barred.
This is known as the limitation period and can vary depending on the type of debt you owe.
For example, most unsecured debts have a limitation period of six years.
This can begin from when you receive a default notice that has expired or from the most recent date of any of the following:
When you last acknowledged the debt
If you haven’t provided written acknowledgement of the debt to the creditor, it will become statute barred after the limitation period has expired.
This must be in the form of an acknowledgement of debt (AOD) document which records the existence of the debt, the amount of debt owed and the reason the debt came about in the first place.
If you have joint debt with another person, written acknowledgment only counts for the person that signed the letter.
When you last made a payment towards the debt
If you have made no payments towards the debt, it will become statute barred after the limitation period comes to an end.
This also applies to any payments made by a financial advisor or debt management company or someone else if you have joint debt.
When the creditor could have taken court action but didn’t
If there was a point where the creditor could have taken court action against you but didn’t, this will mark the beginning of the limitation period before it becomes statute barred.
There will usually be a defaulting term laid out in the terms and conditions of the loan that led to your debt, such as a specific number of missed payments or a certain amount of time you are in arrears.
However, it is also worth knowing that the six-year limitation period only applies to unsecured debts and other debts have different time limits that must expire before they can become statute barred.
For example, personal injury claims generally have a limitation period of three years and mortgage shortfalls have a limitation period of 12 years for capital (the money owed) and six years for interest.
What debts can’t be statute barred?
Whilst there are different limitation periods for different types of debt, some debts are exempt from having a limitation period at all and, therefore, cannot become statute barred.
For example, income tax, VAT and capital gains tax owed to HM Revenue and Customs are exempt from having a limitation period and cannot become statute barred.
Furthermore, if a creditor has taken you to court and issued a County Court Judgment (CCJ) against you before the limitation period has passed, the debt can’t be disputed under the Limitations Act 1980 and, therefore, can’t become statute barred.
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How do I check if a debt is statute barred?
If you have a debt that you haven’t made any payments towards or your creditor hasn’t contacted you about in a while, there’s a good chance it could be statute barred.
However, with different types of debts subject to different limitation periods, it can be difficult to know whether a debt has become statute barred or is still legally enforceable and, as a result, still at risk from legal proceedings.
The easiest way to check whether a debt is statute barred is to find out when you last made a payment or communicated with your creditor about the debt. If this was before the limitation period, it will be statute barred.
If you’re still unsure whether a debt is statute barred, it might be worth seeking debt advice as soon as possible and, crucially, before you contact your creditor or make a payment towards the debt. If you make a payment or write to your creditor about the debt before it is statute barred, it will reset the limitation period and you will become liable for the debt again.
Can I still be chased for statute barred debt?
Whilst a statue barred debt means it can no longer be legally enforced, it doesn’t necessarily mean it no longer legally exists.
In some cases, a creditor might still try to recover statute barred debts – usually through an external debt collection agency – and you can choose to repay the money owed if you wish.
If your debt is regulated by the Consumer Credit Act (1974), you might also still receive letters because, whilst it might be over six years old and statute barred, the law states that some notices must still be sent.
Can a creditor take legal action over a statute barred debt?
It is still possible for a creditor to take legal action over a statute barred debt but, if you can prove the limitation period has expired and the debt is statute barred, the court action will be cancelled.
If you receive any paperwork informing you of legal action being taken over a statute barred debt, you must respond immediately.
It will then be up to the creditor to prove the debt is still enforceable. If they can’t, the court action will be cancelled but, if they can, you will become liable for the debt and must legally repay it.
However, if you fail to respond to any paperwork you receive within a timely manner, the court action will continue to be enforced, even if the debt is statute barred, and further action might be taken against you, such as a CCJ.
How will I know a debt is statute barred?
If you are unsure whether a debt is stature barred, you have two options:
Ignore it
If you choose to ignore a debt, your creditor could still take action against you until the limitation period has expired and, if you don’t know when this is, it could come as a surprise.
This is only a good idea if you are almost certain your debt is statute barred and you are no longer at risk from legal action being taken against you.
Contact your creditor
If you contact your creditor, you can find out, for certain, whether a debt is still enforceable or statute barred.
However, if you send your creditor a letter, email text or message, this will be classed as written acknowledgement and can reset your limitation period if your debt is still active.
The best way to check if your debt is statute barred is to telephone your creditor.
If it is still enforceable, you have the right to ask for proof in the form of a payment receipt or written acknowledgement that was sent from you within the limitation period and is dated accordingly.
It is also worth remembering that a debt can never be statute barred if a CCJ has been taken out against it and you don’t have to prove a debt is statute barred because it is the responsibility of the creditor to prove it isn’t statute barred.
Will statute barred debt appear on my credit file?
Whilst a statute barred debt won’t be listed on your credit file, the missed payment, default or payment break that led to the debt will stay on your credit file for a total of six years and, during this time, bring your credit score down.
For example, if you receive a default notice on a debt but don’t make a payment or acknowledge the debt for the duration of the six year limitation period, it will become statute barred and the default notice will be removed at the same time.
