Many people who have received letters or phone calls from third-party debt collectors are under the impression that their debt may be too old to collect on, and therefore, they do not owe it.
What they are referring to is a statute barred debt that can no longer be collected by the creditor under The Prescriptions and Limitations (Scotland) Act of 1973. An individual debt will likely be visible on your credit file for 6 years from the date of the default.
What Does Statute Barred Mean?
The Prescriptions and Limitations (Scotland) Act, 1973 means that there is a time limit for the creditor to collect the money that is outstanding.
For Scotland, this time limit is five years from either the date of last written contact from you, the last payment made to the account or if the owner of the debt has applied or been granted a decree (court order for payment).
The following must apply during the five-year period for the debts to be classed as statute barred. Note this is for Scotland only;
- The debt has not been acknowledged by the debtor
- There are no decrees on the debt
- The creditor has not made contact about the amount owed
For England and Wales, the time limit is six years, under The Limitations Act of 1980. If the debt is in joint names, the criteria for statute barring also applies to the other party and they must meet the criteria described above.
What Does This Mean For Me?
Under this act, the debt would be deemed to have either been abandoned or repaid. This means the creditor is unable to chase, harasses or start court proceedings against you for the money outstanding.
In Scotland, you do not need to make payments to this debt providing the debt collector has not already obtained a decree against you.
What If I’m Still Being Contacted About A Debt That Is Statute Barred?
Occasionally, mistakes can be made. A third-party debt collection agency may not be aware of the debt being statute barred. In this case, you will need to get in contact with them.
You will need to use specific wording in the communication, so seeking professional advice would be your first step.
You need to let them know that the debt is statute barred and it does not exist. The Financial Conduct Authority guidelines state the collector can be challenged if they try to collect the money, and they know it is statute barred.
More information can be found from the FCA Handbook, section 7.15, point 8.
“A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred.”
What About Other Types Of Debts?
The above rules apply to unsecured debts, such as credit cards and catalogues. Below is a list of other types of debts and their time frames.
- Mortgage arrears (capital) – 20 years
- Mortgage arrears (interest) – 5 years
- Council tax and overpayments of social security benefits – 20 years
- Income tax and VAT – No time limit
Can I Write A Letter To My Creditors?
Yes, you can write to them and tell them the debt is too old to collect, and refrain from contacting you again.
What if I Start Making The Payments After The Five-Year Period?
Making payments after the debt becomes statute barred will not revive the debt. The debt is still statute barred and legally no longer exists. You could even argue that the collector should pay the funds back to you as there was no debt to be paid off.
Seek advice from a professional if you believe you have made payments to a statute barred debt.
What Can My Creditors Do?
It’s important to understand what your creditors can do and what powers they have. Some creditors have what is known as fast track powers, this means that action can happen very suddenly. Here is a list of creditors that have fast track powers;
- UK Government – for tax and national insurance
- Child Support Agency (CSA) or Child Maintenance Service (CMS) – for owed child support
- Local Authority – Council tax or water and sewage arrears
- Department for Work and Pensions (DWP) – benefits overpayment
- Local Authority and Fines Enforcement Officers of the Scottish Court service – court and parking fines
- A creditor that has an agreement registered with the Books of Council and Session or sheriff called a writ registered for execution – this acts as a court order
If you owe rent to your local authority, they have to follow strict procedures to negotiate a payment plan before they can take you to court to force you to pay.
What If The Creditor Has Taken Legal Action?
If the original creditor or third-party collections agency has taken legal action, such as a decree, the time limit becomes irrelevant.
Once the creditor has been to court, they will usually have up to 20 years to start enforcing the collection of that debt and you can not use The Prescription and Limitation (Scotland) Act to dispute that you owe the debt.
What Can I Do After The Creditor Has A Decree?
If your creditor has gone to court and an order has been granted by the sheriff, this is called either a decision or decree. Once a creditor, original or third party, has obtained a decree against you it will appear on a public register for six years.
If you receive the papers stating that you owe an amount that you can not clear in one payment, you can ask to pay it in instalments.
To do this, you will need to complete ‘The Simple Procedure Time to Pay Application’ or the ‘Application in writing for a time to pay direction.’. These are normally included with the paperwork.
You can download the application forms here;
The deadline is normally 21 days to complete and return.
If you fall behind with your repayments when the debt is not statute barred, the creditor can take action to enforce the debt, this is called diligence. This can take a number of forms, including;
- Earnings Arrestment – regular deductions from your wage.
- Bank Arrestment – freezing your bank accounts
- Attachment – the sheriff can ‘attach’ certain items kept outside your home, for example in a shed or garage.
Before your creditor will take any action, they should normally ask a sheriff officer to serve you with a charge of payment.
This is a formal document informing you that unless you pay the debt or ask for time to pay, the creditor will enforce action. You would normally have 14 days to make a payment.
Further Help And Assistance
If you feel you have debts which have statute barred and would like advice, then get in touch with us at Scottishtrustdeed.co.uk.
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