Statute barred debts, an essential guide

What does statute barred mean?

Statute barred means that after a period set out in law the creditor can no longer resort to court proceedings to recover a debt. The creditor is just another name for the person or company you owe a debt to. After this legal time limit has expired, recovery of the debt is termed statute barred. In this case ‘barred’ simply means blocked or prevented. In England and Wales, the debt still technically exists but the creditor cannot ask the court to enforce it because they are barred from starting court action. The rules in Scotland are similar. After the limitation period has expired a Scottish debt is deemed to be ‘prescribed’. Being prescribed means the debt does not exist any more so the creditor cannot recover it.

The underlying purpose of the rule is that court action becomes potentially unfair if too much time has passed since the debt was first incurred. The older the debt, the more likely you are to have lost paperwork relating to it for example. If you haven’t got the paperwork it is very difficult for you to prove your side of the story. The law tries to create a balance between allowing creditors a reasonable time to pursue debts and preventing this unfairness.

Not all debts can become statute barred and we will look at this in more detail further down.

How do I know if my debt is statute-barred?

Whether a debt is statute barred depends on how long it has been before the ‘limitation period’ started. The limitation period is the time limit for the creditor to take action against you to recover the debt. After the limitation period has ended the creditor cannot start court action for the debt.

The limitation period starts from whichever of three events happened most recently. These are:

the last date you made a payment towards the debt
the last date you wrote to the creditor acknowledging that the debt was due
the first date on which the creditor could have started a court claim for the debt

Looking at these three things in a little more detail, knowing whether you have made a payment towards the debt and when this was should be fairly straightforward to discover. It is helpful if you always keep records of any payments made, especially if you make them by cash. If you make a payment it starts the clock for the limitation period running again.

‘Acknowledging that the debt was due’ sounds more complicated than it is. A written acknowledgment will be a letter (or, sometimes, an email) from you to the creditor about the debt. A letter written to the creditor on your behalf can also count as an acknowledgement. It does not count as an acknowledgment if you say in the letter that you do not owe the debt, and a letter from the creditor to you does not count as an acknowledgement either. Acknowledging a debt also starts the clock running again.

If you owe money jointly with someone else then a payment by either of you will start the limitation period running. However, an acknowledgment only counts against the person who signed it so unless both people have signed the letter, or it was written on behalf of both of them, it only starts the limitation period running for one person.

The date the creditor could have started a claim depends on what type of debt is owed. If it is a debt owed by a consumer such as a credit card, payday loan or store card then the date the creditor can first start court action is the date the default notice the creditor issues expires. The creditor has six years from the default date to apply to the Court, so for example if you have an account defaulted on on 1 May 2020 the debt will become statute barred six years after that, on 1 May 2026.

How do I ensure a debt can be written off by being statute barred?

If you have made any payments towards the debt go back through your records to check when you made the last payment. You could check your bank statement if you made payments by card, bank transfer or cheque. You could also check your credit file to find out. If you paid by cash then unless you kept records it might be more tricky, but try to match it into what was happening in your life at the time you last made a payment. Perhaps it was the year your child started school, or the year you were made redundant?

You also need to check if you have acknowledged the debt at any point, and make a note of this date.

Ultimately you do not have the power to ensure a debt is statute barred because the creditor could start court action at any point up to the limitation date.

Does a statute barred debt stay on my credit file?

When you default on a debt the record of that default stays on your credit file for six years. Do not be misled – this six year period may not be the same as the six year limitation period. Payments or acknowledgements may have restarted the clock running after the default date, meaning that a debt can still be live but not appear on your credit file. Similarly, a debt can be statute barred but still stay on your credit file.

In England and Wales statute barred debts still exist, they just cannot be enforced by court proceedings. The creditor can still contact you and ask you to pay the debt. The rules set out by the Financial Conduct Authority say that if you tell a creditor you are not going to pay a statute barred debt then the creditor should not continue to contact you about it.

What debts can become statute barred?

Many types of debt can become statute barred, for example credit cards, pay day loans, mortgage arrears, rent arrears, utility and mobile phone bills and overdrafts.

The limitation period in England and Wales for most debts is six years. Mortgage arrears have a longer limitation period of 12 years for the portion of the debt which relates to repayment of the capital. In Scotland the relevant period is 5 years for most debts but 20 years for mortgage debts and some other claims such as council tax arrears.

There are some debts which cannot be statute barred so the creditor will be able to pursue you for these even outside the usual time limits.

What debts cannot become statute barred?

Not all debts can be statute barred. If your debt is owed to HM Revenue and Customs (HMRC) for VAT, income tax or capital gains tax payments then there is no provision for the debt to become statute barred. If you have a unpaid tax debt HMRC can pursue you for this, even taking you to court, despite it being a very old debt. This is the case whether you are in England and Wales, or Scotland.

If you have been overpaid benefits by the DWP or local authority, or you have been overpaid tax credits by HMRC then these public bodies can recover payment without the ‘debt’ being statute barred. This is because they have powers to recover those overpayments without going to court, so the barring process is inapplicable. These overpayments could be recovered by deduction from benefits or wages without the need for a court order.

In England and Wales, once a creditor issues a claim in the County Court to seek recovery of the debt the debt cannot then become statute barred, as long as they issued those proceedings within the limitation period. This is similar in Scotland.

Can I just ignore my debts and hope they become statute barred?

It is not a good idea to ignore your debts. This does not make the problem go away, and debt problems can quickly mount up and cause problems for you and your family.

Of course, if you do not acknowledge the debt, you do not make a payment and the creditor misses the time limit to enforce a debt which can be statute barred then you will not have to pay it. This is a risky strategy because the creditor could apply to the court at any point up until the end of the limitation period.

Depending on your individual circumstances you may wish to explore the options available to you to manage your debts. DebtBuffer’s AI chatbot will ask you a series of questions to help you understand what the options might be for you.

Do I have to pay off a debt that cannot be statute barred?

If your debt cannot be statute barred, for example it relates to tax debts owed to HMRC, then there is no period after which it is safe to assume that you will not be pursued for it. If your debt is statute barred you can still pay if you want to, but make sure this does not put priority payments such as your rent and payment of other debts at risk.

If you are in the position of having debts which are not yet statute barred, you need assistance writing letters to your creditors, or you have debts which will never be statute barred you will find helpful information to understand your options on the website. We help people understand their options and get treated more fairly by their creditors. Life is too short to carry the burden of bad debt, so find out today if there are options available to you to help you manage your debts.