This is one of the most common questions that people ask us, and the short answer is ‘when you’ve paid back what you owe’. But if there is no communication between you and your creditors, and six years elapse, the debts can no longer be enforced and are effectively written off.
After six years, any unsecured debts from credit cards, store cards and overdrafts become ‘statute barred’, and your creditors can no longer pursue you. The rules only apply if:
- The creditor has not obtained a court order against you
- You, or anyone else owing money if it’s in joint names, has not made a payment in six years
- And/or you have admitted to the creditor that you owe money in the last six years.
In Scotland, debts can become barred under the Prescription and Limitation (Scotland) Act 1973 after five years if no payment has been made or claim has been made.
Let’s illustrate this with an example. Imagine you took out a store card but then lose contact with the provider and stop payments. Out of the blue, you receive a letter from the lender saying you owe money, even though it’s eight years since you last had a phone conversation, received a letter or made a payment.
In this case, the creditor cannot pursue you or take legal action, no matter how much you owe. The default is also cleared from your credit file, so no longer affects your chances of being approved for future loans and credit cards.
Once a debt is ‘statute barred’ you can report a creditor to the Financial Conduct Authority and/or Financial Ombudsman for harassment.
However, this doesn’t mean you should ignore your debts that are not statute barred and hope that no action will be taken. Lenders nearly always try to claim back money, and chances are you’ll simply see the amount you owe increase until you’re faced with legal action.
Where you have been threatened with court, for example if a creditor has asked for a CCJ, you must pay the debt, even if six years has passed. Remember too that mortgage debts require 12 years of no contact to be written off although it’s likely your home will be repossessed during that time.
What happens if you haven’t contacted a creditor?Lenders often pass the debt to a collection agency – and the tactics they use to recover the money can feel very intimidating. Unlike a bailiff, a debt collector is not allowed to enter your home without permission, but they can still visit you in person.
Continue to ignore communications, and your creditors may look at applying for a CCJ against you.
Are old debts really written off?If you believe a debt is statute barred, the first thing to do is to ask your creditor for proof that it is still enforceable (quoting the Limitation Act 1980), and state that you do not acknowledge the debt. Without proof of liability, you can simply ignore the unpaid debt.
The question, of course, is whether you want to spend six years worrying that you’ll be chased for the full amount with interest. When you consider that most creditors will do everything in their power to claim back what is owed, it’s much better to start making payments sooner rather than later.
Our advisers offer free, confidential advice on a range of repayment plans. For more details call 0808 250 9543 or contact us.