Debt collection – ‘that doesn’t apply to me’, you might think. Well, it actually affects well over half the adult population of the UK. Around 63% of adults living in the UK currently have some form of personal debt. Quite a significant number, we’re sure you’ll agree.
There are all sorts of legislations and jargon surround debts and debt collection, and it can seem like a bit of a nightmare trying to manoeuvre your way through it all and work it all out. One term you might come across is ‘time-barred debt’. We take a look at what time-barred debts are, and answer some of the more commonly asked questions about them and debt collection in general.
Time-barred debt – the basics
With so many of us being affected by debt, more and more of us are looking for solutions to our debts. Do we owe them? Should we pay them? What can we do?
It can be argued that the debts you make, you have to pay, but there are certain occasions when you might not have to pay at all. This is the case if your debt is a time-barred debt.
Time-barred debt, or statute-barred debt as it is sometimes also known, is when money that you have borrowed and haven’t repaid basically is no longer collectable as a certain number of years have passed.
Debts and credit agreements usually come with a statute of limitations. This is basically the time period in which the debt can be legally collected. Sounds quite simple, right? Well, there’s a little bit more to it all than just that.
This statute of limitations can vary wildly depending on what kind of debt or agreement you might have. Some debts have a 3-year statute of limitation, others have a 12-year statute of limitation, and in some cases, there are debts that have no statute of limitation.
How time-barred debt works
Time-barred debt usually comes to light when a debt collector gets in touch with you about repaying an old debt. This may well be a debt that you have completely forgotten about it, as sometimes it can be years after the event.
If this is the case, and you can prove that neither you nor the original creditor, have been in touch with each other for several years, then you will not be legally obligated to repay the debt. This debt then becomes time-barred.
Creditors and debt collectors may also attempt to use court action against you to collect these time-barred debts, but it is highly unlikely they can win if the statute of limitations has run out.
However, if there is evidence that you have reached out to the company before the statute of limitations has expired, or if you have paid even the smallest amount of money towards the debt, the debt is no longer a time-barred debt. You will then have to repay it in full.
Rules surrounding time-barred debt
While it may seem quite simple, and that you won’t have to pay the debt if it is past what you consider is the statute of limitation, it isn’t quite as easy as all of that. There are lots of rules surrounding time-barred debt.
One of the key things to note is whether or not your debt has an extended statute of limitation. On the whole, most personal debts have a 6-year statute of limitation. There are exceptions to this though.
You’ll be able to find out more about the statute of limitation that your debt falls under if you carefully look through the original agreement. You may have agreed to a shorter statute of limitation, meaning your debt becomes a time-barred debt sooner.
The following kinds of debt are exceptions to the 6-year statute of limitation rule:
Personal Injury Claims
These kinds of debts fall under the shorter statute of limitations category. Typically, the statute of limitations is only 3 years with personal injury claims. It’s worth double-checking all your documentation and taking it from there though.
Mortgage shortfalls
If your debt is with regards to a shortfall in your mortgage repayment, you’ll find that they have a much longer statute of limitation – this is typically 12 years. As this is probably involving a much larger sum of money, the creditor will be more anxious to get this paid back.
Income tax, HMRC debt & VAT
These types of debts don’t actually have a limitation period at all, and therefore they can never become time-barred debts. If you have a sum of money owed to HMRC, they will be able to chase you for it for as long as they need to.
FAQs
That’s some basic information regarding time-barred debt. Below, we’ll go through some of the more frequently asked questions surrounding time-barred debt, and debt collectors in general too.
Will my debt be written off if it’s time-barred?
Technically, even if it is a time-barred debt, it still exists, and still may affect your credit rating. You may not have to pay it, so in that respect, it is written off. However, it is still an entity. This may result in it being tricky to apply for further credit down the line.
Can a creditor keep on chasing me even if I have a time-barred debt?
Yes. Despite the fact that the Financial Conduct Authority (FCA) have laid out certain rules and have declared that it is unfair for your creditor to pursue you about a time-barred debt, the creditor isn’t obliged to stop contacting you. You may also want to check if your debt is indeed a time-barred debt. Sometimes debts don’t have a statute of limitation, and so the creditor can continue to chase you for as long as they need to.
Do I have to pay a time-barred debt?
No. If you are certain that the debt can be time-barred, legally you do not have to part with any of your money. If investigations into this debt are forthcoming, and they find out that you had paid any amount towards the debt, no matter how small, then the debt is no longer a time-barred debt, and you will have to settle it.
Can I make a complaint?
If you believe that the creditor or collector you are dealing with has behaved in a negligent and disrespectful way, or has been hassling you too much, you can make a complaint about them. Start off by detailing the nature of your complaint to them directly, and if they don’t respond, you can escalate matters to the Financial Ombudsman Service.