Statute Barred Debt, how it works and how it affects your credit report

Posted by Neil Greenhill in Dealing with Debt on 5 April 2016 - Neil is a Senior Credit Analyst at checkmyfile

A Statute Barred debt can generally be considered a debt where the time a creditor has to chase a debt has passed, declaring the debt statute barred will then be a defence against further legal action. Contrary to popular misconception, statute barred does not mean that your debt is written off.

In England, Wales and Northern Ireland the area is governed by the Limitation Act 1980. This Act covers the period during which a claim can be brought to court – this is known as the limitation period.

How it works

Under the Limitation Act 1980, a creditor has 6 years to pursue most outstanding unsecured debts and up to 12 years in the case of some mortgage shortfalls. There are three criteria for the limitation period to apply:

  • There must not have been a payment made towards the debt during the last 6 years
  • The debt must not have been acknowledged or confirmed by the debtor in the last 6 years
  • There must not be a pre-existing court judgment for the debt, where there is the limitation period does not apply – an existing court judgment is always enforceable

Should these three criteria be met it means that no further court action can be brought regarding this debt.

What happens when a debt is statute barred?

Where a debt is deemed statute barred the debt doesn’t cease to exist or disappear, it merely becomes unenforceable through the courts.

Where a creditor has not been in contact to chase the debt during the limitation period the FCA has stated in its Consumer Credit Sourcebook that the creditor should no longer try to enforce the debt. The FCA has also ruled in the same document that where a consumer states that they will not be paying as debt because it is statute barred and unenforceable the creditor chasing the debt should no longer seek to enforce the debt.

However, the rules do not exist to help people avoid their debts. If the creditor has continued to contact the debtor during the limitation period then they can continue to do this after the limitation period as well. Further, the contact does not need to have been received by the debtor – for instance where the debtor changed address without telling the creditor – the creditor only needs to have tried to contact you at the last address you provided.

In Scottish law

The rules in Scotland are different in that after the 5 years limitation period has ended the debt ceases to exist and so the creditor can’t ask for payment unless, as in England, Wales and Northern Ireland, a court judgment has already been obtained – in Scotland this will be in the form of a Decree .

So how does this affect the entries on your credit report? Ultimately it won’t have any impact on your credit report. It is possible for an account to be statute barred but still appear on your credit report, for instance where the company defaults the account after the last payment or acknowledgement the account will still remain on your credit report for 6 years after the date of default.

Equally it is possible for an account to be removed from your credit report but not be statute barred, for instance where an account defaults but you acknowledge the debt 3 years after the date of default an account would not become statute barred for another 3 years after the default is removed from the report.

Your credit report only shows how long entries will remain on your credit file, it will not make any indication regarding whether you can claim an account is statute barred.

See what else is shown on your credit report

Dealing with debt collectors

Don’t think for a moment that you’ll never see a debt collector in your lifetime. Even if you have a sparklingly brilliant credit file, you could find yourselves facing a doorstep collector.

Published on 19 Feb 2018 by Barry Stamp

Full Article

Does Statute Barred Mean My Debt is Written Off?

If you look around on the internet for debt advice you might see one questionable tip popping up from time to time: ‘don’t pay off your debts, wait six years for it to become statute barred and you’ll be home scot-free.’ If this sounds too good to be true, that’s because it probably is, and if you think it’ll be without consequence you could be in for a nasty surprise.

Published on 10 Jan 2018 by Tom Magor

Full Article

How Your Credit Score is Affected When a Default Drops Off

If you’ve got one default, you might be counting down the days until it is no longer reported to the Credit Reference Agencies. But if you have more than one, will you see your Credit Score rise as each one drops off of your Credit Report?

Published on 4 Jan 2018 by Richard Catlin

Full Article

What could happen after a county court judgment is issued

Once a court judgment has been issued but the individual still refuses to pay the outstanding debt or come up with an agreement to clear it, the claimant has a number of legal remedies available to them through the court systems.

Published on 16 Jan 2017 by George Coburn

Full Article

Facing Financial Problems

No one should feel like money problems are unique to themselves, we all have to think about money at some point. Financial problems, job security, debt and redundancy are all issues that realistically should be considered. How we react to these factors can impact our lives and our wellbeing, but luckily there are many different facilities that aim to help those trying to cope with money worries.

Published on 12 Jan 2017 by Paul Anderson Riley

Full Article

Consolidating Debt

Do you have what seems a never-ending mountain of debt and you’re struggling to know what you’re paying and to who? If so, you may be considering debt consolidation, in particular a debt consolidation loan.

Published on 9 Jan 2017 by Ben Ryland

Full Article

Don't give yourself a Christmas hangover

If you are concerned about debt during the festive season you should get advice now, warns the National Debtline. 5m Brits worry about money in the run up to Christmas, with one in three adults putting their gifts on credit, and if you are one of them, more debt is the last thing you want for Christmas.

Published on 6 Dec 2016 by Kelly Luff

Full Article

Students understanding of debt is seriously lacking

Christmas is an expensive time of year. Though for many students, this is just as relevant for most other times of the year too.

Published on 29 Nov 2016 by Ben Ryland

Full Article

Insolvency and its effect on your credit score

Contrary to the belief of some, insolvency is not a ‘get out of jail free card’. When you are declared insolvent, the entry remains reported for 6 years on your credit file and will continue to pose a significant barrier to your chances of obtaining credit – even after the insolvency is discharged.

Published on 17 Nov 2016 by Tom Blandford

Full Article

Number of people going insolvent in England and Wales increases by almost a fifth

Personal insolvencies saw a 20% increase in the third quarter of this year compared to the same three months in 2015, based on data released from the Insolvency Service.

Published on 3 Nov 2016 by Ben Tumilty

Full Article
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews