Can an Overdraft be Statute Barred?

Are you wondering if an old overdraft can be written off as statute barred? Understanding this can be confusing, but you’re not alone. Each month, over 170,000 people come to us for guidance on debt solutions.

In this friendly guide, we aim to help you with:

• What ‘statute barred’ means for an overdraft debt.
• How long it takes before a debt becomes uncollectible.
• The process of how a debt becomes statute barred.
• If it’s possible to write off some of your debt.
• How to tell if your debt is statute barred.

We know dealing with an old debt can be scary. You may be worried about being chased for a debt or unsure about what to do. We’re here to help you understand your options and make the best decisions. This guide will provide you with the facts you need in a clear and simple way.

You shouldn’t ignore an old debt, hoping it’ll just be written off. It’s important to understand your situation and take the right steps. Let’s delve deeper into the world of statute barred debts.

How long before a debt becomes uncollectible?

Several types of debt become legally unenforceable after six years or after five years in Scotland, as long as other conditions are met. This is known as a statute barred debt and does not need to be repaid. 

Once a debt becomes statute barred in England, Wales or Northern Ireland, it is not enforceable but it still exists unless written off by the creditor. On the other hand, statute barred debts in Scotland are completely wiped after the limitations period, typically five years. 

Not all debts can become statute barred. And some debts have longer periods of time before they become statute barred, such as mortgage arrears and Scottish council tax debt. 

How does a debt become statute barred?

A debt becomes statute barred when you do not make a repayment on the debt or acknowledge that you owe the debt within the limitations period, which is usually six years or five years in Scotland. 

The countdown to when your debt becomes statute barred restarts if you do either of the above. For example, if after one year you make a payment towards your debt, the time before the debt could potentially become statute barred starts over. Thus, in such a case, it would take a further six years or five years in Scotland for many types of debts. 

Can an overdraft be statute barred?

An overdraft debt can become statute barred, which has been confirmed by debt charity StepChange. The limitations period before an overdraft becomes statute barred in England, Wales or Northern Ireland is six years. Overdrafts become prescribed and erased in Scotland after five years. 

However, there could be ways that banks prevent overdrafts from becoming statute barred, such as charging interest and taking payment from your bank account as allowed in the overdraft agreement. Therefore you are continually making payments on the debt and the limitations period continually starts again, ensuring it will never become statute barred. 

What other debts become statute barred?

Several types of debts can become statute barred, such as personal loans, credit cards, mortgages, council tax, catalogue debt and debts to energy suppliers. Not all of these have the standard limitations period before becoming statute barred. For example, a council tax debt in Scotland doesn’t become statute barred until after 20 years have passed. 

It is easier to point out which debts do not become statute barred. First of all, no debt can become statute barred you have already been issued with a County Court Judgment (CCJ) requesting that you to pay that specific debt. After a CCJ has been issued, the creditor has as much time as they need to recover the debt. 

The other type of debt that never become statute barred are debts to HMRC. This includes VAT debt, tax debt, tax benefit overpayments and CGT debts. 

How do I know if my debt is statute barred?

You should be able to tell if your debt is statute barred by reading through past correspondents, checking emails or looking at bank statements. 

There is no statute barred register and you will need to work out if the debt has become statute barred yourself. Remember that your last payment or acknowledgement of the debt (in writing!) must not have been within the last five or six years for most debts. 

If you think your debt is statute barred and no longer needs to be paid, it is paramount that you get confirmation of this before making your next move. You don’t want to claim a debt is statute barred when it in fact isn’t. Get help working out if your debt is statute barred for free by contacting a debt charity. 

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What to do when your debt is statute barred

When your debt becomes statute barred you may choose to do nothing. Others may decide to inform their creditor that the debt has become legally unenforceable and even ask for it to be written off, especially if they have requested a payment. Remember that statute barred debts still exist, you just don’t have to pay. 

You should notify the lender that the debt is statute barred in writing. You can use our free statute barred letter template to make it even easier. Simply add your own information and send it off. You may want to keep a copy for reference. Don’t sign the letter. 

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Can an overdraft be statute barred? (Quick recap)

Technically, an overdraft can become statute barred after six years or it can become prescribed (erased) after five years in Scotland. But banks may have things in place to prevent an overdraft from ever exceeding the limitations period. 

Learn more about statute barred debts on MoneyNerd

There is a lot more to know and uncover about statute barred debts. You have instant access to free information on our complete statute barred guide. Take a look now for further help and more answers to common questions.