Can old debts be written off?
Written by Chelsea Potter on 27 April 2016
It isn’t unusual to have debts that have been sitting around for a long time. Sometimes, you missed a payment and have failed to get back up to date, or you may have an unpaid debt because the creditor in question simply hasn’t chased you for it. However, just because you haven’t received any letters or phone calls, doesn’t mean the debt isn’t there. So what happens to these unpaid and ageing arrears?
Well the first thing that usually happens if you haven’t been in contact with a company you owe money to, is they’ll pass your debt onto a collection agency. If the original creditor cannot get in touch with a debtor it is not uncommon for them to outsource the collection of the debt to someone else. As those who have dealt with them will attest, debt collection agencies tend to be much more ‘thorough’ when finding and collecting debt.
If traditional communications fail then it’s possible that your creditor will take a further step of requesting a County Court Judgment (also known as a CCJ). If this is asked for, the courts will decide whether or not you are liable to repay the debt, and set out in detail, the manner in which it has to be repaid. CCJ’s stick to your record and can seriously reduce your chances of getting credit in the future.
But what happens to really old debt – debt that has been ignored for years and seemingly forgotten?
Can Old Debts be Written Off?
Well, yes and no. After a period of six years after you miss a payment, the default is removed from your credit file and no longer acts negatively against you. The same thing goes with debts; according to The Limitation Act 1980, after a period of six years, if the debtor has not acknowledged the debt through payment or contact, it becomes statute barred. This means that (with the exception of Council Tax bills), the creditor cannot use legal means to enforce you to pay a debt.
The downside is, although a company cannot legally make you give them any money, the debt still exists and they can bother you with as many letters, emails, texts or calls as they like until the debt is paid in full.
It’s also worth noting that if someone takes legal action (such as requesting a CCJ) on you during the six-year window since you last acknowledged the debt, then you are still legally obliged to pay the debt and it will not become statute barred. If the debt in question is related to a mortgage, then the time-limit doubles and you require 12 contactless years before any statute barring.
What to do Next?
Even if you are not legally obliged to pay any money once a debt becomes statute barred, you can still get chased for it. Besides, no one sends you a letter in the post telling you that you don’t have to pay them back anymore.
If someone contacts you about a debt that you think might be statute barred, then you can respond by asking the creditor to prove that what you owe is legally enforceable. This can be done with a simple letter in which you should ask for proof that the debt isn’t statute barred (quoting the Limitation Act 1980), and state that you do not acknowledge the debt.
If you receive proof that you have acknowledged the debt within a six year period then it’s time to pay-up. If not, you are theoretically free to leave that debt unpaid forever, and you can even make a complaint to the Financial Ombudsman if the company in question continues to hassle you, without proof of liability.
But, do you really want that hanging over your head? What you can do instead is contact the company and make them an offer. The debt is not legally enforceable but it still exists. Make your debtor an offer, starting at around 10% of the total value, and see if you can’t properly get rid of that old debt; for a fraction of the price.
Filed under Debt Facts