How to Write Off Debt Legally – 5 Options Explored

Affordable repayments
Reduce pressure from people you owe
Potentially write off some unaffordable debt

For free and impartial money advice you can visit MoneyHelper. Careful, some debt solutions have ongoing fees and can affect your credit rating.

Is It Possible to Write Off Debt?

As you might have guessed, it is possible to write off debt. Sometimes you can write off everything you owe, while in other situations you can write off a percentage of your debt.

Although writing off debt is possible, it is not always possible for everyone and not recommended to all debtors.

Don’t worry, here’s what to do!

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

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Can All Debt Be Written Off?

The short answer is no, not all debts can be written off.

In my experience, any unsecured debts are much more likely to be written off but the rules are different depending on what debt you owe. Unsecured debt relief also tends to be more successful if you are facing financial hardship.

If you owe anything to a secured creditor, for example, it is unlikely that you will be able to write off this debt. This is because these creditors tend to rely on their security. Generally, this means that a secured creditor will rely on the sale of your mortgaged property to discharge their debt.

That said, lenders are much more likely to write off some of your debt if you can repay a percentage of what you owe. This is more likely to happen if your debt is greater than the value of your mortgaged property.

However, HM Revenues and Customs (HMRC) very rarely write off debts owed due to Tax Credit overpayments. In just about all cases you will have to pay back this particular debt.

Court fines are also quite unlikely to be written off. This is especially true if the fines were issued under the Criminal Justice Act 1988 or the Drug Trafficking Act 1986.

If you can prove that you are under extreme financial hardship, your local council may be able to write off any Council Tax debts. But keep in mind that this is quite difficult to do and tends to considered as a last option.

How to Write Off Debt Legally

If you want to know how to write off debt legally, we have four ways you can do it below. Not everyone is able to use all or any of these debt management options. But for some people writing off some debt is a realistic possibility.

Creditors are under no obligation to write off your debt so if denied, you should then consider one of the following options:

Debt Settlement Offers

A debt settlement offer is an offer made to your creditor asking for them to clear the debt with the amount offered. This often means offering less than you owe and having the rest of the debt you owe wiped.

For example, you might have a debt of £1,000 and make a debt settlement offer of £750. If they accept, you pay the £750 and manage to wipe the other £250. But keep in mind that some creditors are not at all open to debt settlement negotiation.

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Individual Voluntary Arrangements

IVA’s can write off some of your debt.

They are a legal agreement between you and your creditors organised by a certified insolvency practitioner.

You make monthly repayments for a fixed term, typically 60 months. At the end, any debt you have not repaid is automatically wiped. Not everyone will qualify for an IVA, so you need to find out if they will work for you.

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Debt Relief Orders

This is a debt solution for people who do not own a home, have less than £75 disposable income each month and have debts below £30,000. It is really for people who really can’t pay off their debts because they have low incomes.

The Debt Relief Order will block creditors from trying to collect the debt for a full year. Once this year is up, all your debt can be written off as long as your financial situation has not improved. It’s important to note that most solutions will impact your credit score.

Get an assessment

In reality, your debts are not exactly wiped, but they may as well be wiped because you cannot be made to pay and you will never have to deal with bailiffs.

For your debt to qualify for Statute Barred, it must be at least six years old. On top of this, it must not:

What About Statute-Barred Debts?

The other way to wipe of debt is through a legal loophole known as Statute Barred. In a nutshell, it is when debt is too old to be taken to the courts, and therefore, your creditors can never legally force you to pay.

In reality, your debts are not exactly wiped, but they may as well be wiped because you cannot be made to pay and you will never have to deal with bailiffs.

For your debt to qualify for Statute Barred, it must be at least six years old. On top of this, it must not:

Have been repaid in part over the last six years
Have been issued with a CCJ
Have been acknowledged in writing by the debtor over the last six years

If you pay some of the debt off or acknowledge the debt in writing, the clock resets and you would have to wait another six years before it qualifies.

You can find out if your debt qualifies and can be ‘written off’ with the Statute Barred loophole by speaking with debt charities for financial advice. If it does qualify, they can provide you with a letter to send to your creditors to inform them that they cannot collect the debt – and to leave you in peace.