When a debt write off isn't a debt write off

Posted in 'Dealing with Debt' by Barry Stamp

18 January 2012

When a lender ‘writes-off’ a debt, it doesn’t necessarily mean that the borrower is home, free and clear of the underlying debt.

A write-off is an accounting exercise, where the lender believes that the chances of recovering the debt is so small that it should no longer be counted as being recoverable and shouldn’t be included on the lender’s balance sheet as an ‘asset’. After an account has been written off for accounting purposes, the monies are still due to be repaid, and interest will continue to build up on the amount owing.

Even after six years, when most people believe that a debt becomes ‘statute barred’, the debt remains due. The ‘statute barred’ label refers to the Limitation Provisions Acts, which prevents a lender from taking the borrower to court about the debt, and then enforcing a judgment through court action such as sending the bailiffs in, or getting an attachment of earnings order.

A lender can still try to collect any debt even after it has been written off for accounting reasons, or if it is statute barred, or even if it is no longer being reported to the credit reference agencies. Typically debts are continued to be reported to the credit reference agencies for six years after the date of the last default, or after the date of writing off the debt.

Lenders can even instruct debt collectors to pay home visits to collect a statute barred or written off debt, and if the lender discovers that it has money held on behalf of the borrower – for example a bank lender might discover a current account in a different branch – then the lender can snatch the money in the current account under a right of set-off.

Because of the cost of collecting old debt, and of instructing debt collectors, most lenders just give up after six years, in practice.

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