What is a Statute Barred Debt? How to Find if Debt is Statute Barred?

Debts of any kind need to be paid. Every country has a different set of rules and ways for working regarding debts and their collection. The law of England and Wales suggests that debt can be statute barred. Here are all the details about the same.

What is a statute barred debt? How do I Find if Debt is Statute Barred?

Debts need to be collected on time, and the borrower of such money needs to pay back the money in the stipulated time. However, should the borrower fail to pay the amount of money, the lender, according to the rules and laws of England and Wales, has a set number of days to make an appeal to the court for non-payment of the money owed to the lender by the borrower.

And if the number of years for applying to the court to get your debt cleared passes, the lender cannot make an appeal to the court for recovering the debt. This phenomenon, where the creditor or the lender runs out of time for applying to the court for the recovery of such money thereby given to a person or entity, is called a statute barred debt.

However, if the debt has become a statute barred debt, it, under no circumstances, can be called irrecoverable. A statute barred debt essentially means that the creditor cannot take the help of the court to recover the debts. But the lender or the creditor can use their own means to get the debt in any way possible.

The Time for Appeals and What will Happen If you Miss the Time Period?

For almost all cases of debt, the time period by the law has been fixed at six years for England, Wales and Ireland. This period of six years applies only to debts of the following nature:

• Personal Loans
• Credit or Store loans
• Gas or electric arrears
• Council tax arrears
• Benefits overpayment
• Payday loans
• Overdrafts
• Catalogs and many more.

There are certain exemptions to the six-year rule, and they are mentioned under:

• The debts or borrowed sums of money as capital for your mortgage stand at 12 years,
• A period of three years is given to shorter claims.

There are some debts that will not be included in the calculation of statute-barred debts, such as:

• Debts owed to the crown will not be applicable and cannot be termed as statute barred debts ever. Example- income tax.

What is the Governing Force for such debts?

The statute barred debts or the framework for deciding debts and their collection including deciding whether the debt has become statute barred debt or not, is governed by the Limitations Act 1980. According to the Act, the period of six years is given to the creditors of England, Wales and Ireland. However, the rules are a bit different for Scottish debts.

The time period for Scottish debts

Scottish debts are governed differently. The creditors are given only five years to appeal to the court for the recovery of their debts. However, once the period of five years elapses, the creditors cannot make an appeal for their debts.

However, an appeal can be made after the passing of five years only under one condition. If a decree has been issued by the court before the passing of five years, the creditor can still make an appeal even after the period of five years is over.

How and When can the Limitation Act be used?

The debt cannot be enforced if, according to the act and the law, the following conditions are met:

• There is no written proof that affirms that the borrower has borrowed money from the lender or the creditor in the last six years.
• There has been no payment made on behalf of the borrower against the debt or debts in the last six years.
• The lender or the creditor has not registered a County Court judgment (CCJ) against the borrower.

If the above-mentioned rules apply to the case, then the debt is not enforceable.

What does “not enforceable” mean?

The term “not enforceable” means that the creditor cannot make the borrower pay the money after the limitation period has elapsed. Furthermore, if the creditor takes the borrower to court, even when the borrower can defend themselves and win.

Also, once the limitation period has elapsed and the debt has become a statute barred debt, then the creditor cannot keep chasing the borrower and ask for the money that is owed to the creditor. However, there are certain exemptions to this point, and here they are:

• The creditor cannot make any requests for payment of the debt owed by the borrower is the creditor has not been in touch with the borrower over the past six years.
• The creditor can ask for repayment of the debt and other repayments for the same even after the decision of the debt being a statute barred debt has been passed if the creditor has been in touch with the borrower over the past six years.
• Furthermore, if the borrower changes their address and the other ways of communication without telling or informing the creditor, the creditor can still ask for money and the repayment of the debt from the borrower.
• For Department for Work and Pensions, it is easy to recover their debts even though the limitation period has elapsed. They can make deductions from the payment and wages of the borrower or borrowers to recover the debt owed by the borrower even after the debt has been declared a statute barred debt.

What to do is a Creditor Contacts you for Statute barred debts repayment?

When a creditor gets in touch with you to pay up on debt, and you know for a fact that the debt is a statute barred debt, then you are not liable to make any repayments. Other than this, you can and should write to the creditor stating that the debt owed to them by you is a statute barred debt.

Also, remember that the proof of burden that the debt is not a statute barred debt and that you need to pay the creditor does not fall upon you but on the creditor. If you know that even if the creditor takes you to court, the court too will decide in your favor, write a letter and state all the relevant things for this matter alone and let the creditor know that you are not liable to pay.

Also, read the points mentioned in the “What does “not enforceable” mean?” section to understand when can the creditor make demands for the debt to be repaid.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.