People who struggle with debt often find themselves grappling with questions about the legalities surrounding it, such as how long they can be pursued for payment and the implications of being pursued outside of these time limits.
In the UK, most unsecured debts are written off and don’t need to be paid after five or six years. However, the limitation period can differ depending on the type of debt and where you live, so it’s important to know how long each creditor has to take legal action.
How does credit card debt occur?
As one of the most common types of debt in the UK, credit card debt can quickly creep up on you. Even if you’re confident you can pay off your balance at the time of purchase, it only takes another unexpected expense to make your credit card bill unaffordable.
In most cases, credit card debt occurs when you only make the minimum payment each month and interest starts building. The longer you do this, the more interest will accrue and the harder it will be to pay back the amount owed.
Buying something with a credit card can give you the illusion that you’ve already paid for it. However, it’s important to remember that you still need to pay for it – as well as anything else you’ve bought with the same credit card – by the deadline on your credit card statement.
Using credit cards for impulse purchases can also lead to debt. If you’re using credit cards for daily essentials like travel or groceries, it might be time to reevaluate your spending habits and work on reducing your credit card usage.
How much debt do you have?
Can credit card debt be written off in the UK?
Yes, credit card debt can be written off in the UK. It’s usually done through a debt solution, such as an Individual Voluntary Arrangement (IVA), Debt Relief Order (DRO), or bankruptcy.
It’s also automatically written off or ‘statute barred‘ after five or six years as long as it hasn’t been acknowledged or paid in this time. When this happens, the creditor can no longer legally chase you for payment or take legal action against you to recover the money owed.
However, in the time before it becomes statute barred – known as the limitation period – your creditor is free to take legal action against you at any time.
The statute of limitations protects you from legal action, but it doesn’t stop your creditors from trying to recover the debt through non-legal means. This means that they can still hire debt collectors to collect payment of the debt on their behalf after it has become statute barred.
If you’re the authorised cardholder for someone else’s credit card account (e.g. a partner or spouse), the card company cannot ask you for payment of the debt.
How long before a credit card debt is written off?
The Limitation Act (1980) is the legal framework that sets out, among other things, the limit limits for legally enforcing different types of debt in England and Wales. For most unsecured debts, the limitation period is six years.
The Prescription and Limitation (Scotland) Act (1973) sets out the rules that should be followed for debts accrued in Scotland. Instead of six years, most unsecured debts can be chased for five years before they become statute barred.
The unsecured debts covered by these time limits include personal loans, credit cards, overdrafts, utility arrears, store cards, catalogues, payday loans, benefit overpayments (e.g. tax credit overpayment), and council tax arrears. However, while you should assume that most debts become statute barred after this time, there are some exceptions to the five or six-year limitation period.
For example, in England, mortgage shortfalls have a limitation period of 12 years and HMRC debts (e.g. income tax) can be chased indefinitely. In Scotland, mortgage shortfalls and HMRC debts have a limitation period of 20 years.
How is credit card debt written off?
As previously mentioned, while credit card debt will be automatically written off after five or six years, it can also be written off with a debt solution, such as an IVA, DRO, or bankruptcy.
Some companies promise to write off your credit card debt for you, but this is misleading and, in most cases, you’ll end up paying more than you need to in extra fees. Be wary of firms claiming to use a legal loophole or asking for money upfront.
We’ve provided a brief description of the debt solutions that can be used to write off credit card debt here:
Individual Voluntary Arrangement (IVA)
An IVA is a legally binding agreement between you and your creditors to repay your unsecured debt in smaller instalments over a set period (typically five years).
When you apply for an IVA, your financial situation will be assessed and your monthly payments will be based on how much you can comfortably afford.
During an IVA, all interest and charges will be frozen and your creditors will stop chasing you for the amount owed.
Once you’ve made your final payment, all the included debts will be written off (even if you haven’t fully repaid them) and you’ll be free to make a fresh financial start.
Debt Relief Order (DRO)
A Debt Relief Order (DRO) is a formal debt solution that gives you relief from your unaffordable debts for a fixed period (usually 12 months) before writing them off.
It’s commonly referred to as a cheaper and less formal version of bankruptcy, as it works in a similar way but tends to have less of an impact on your finances.
To qualify for a DRO, you must have a low income, few assets, not own your home, and have debts of less than £50,000.
Once the 12-month DRO period comes to an end, all included debts will be written off if your financial situation hasn’t improved in that time.
Bankruptcy
Bankruptcy is a legal process that can help you write off your unaffordable debt in as little as 12 months if you’re insolvent (unable to pay your debts as they fall due).
When you become bankrupt, you’ll need to hand over your assets to the individual handling your arrangement. They can then sell your home or car to recover full or partial payment of the debt.
Once you’ve completed your bankruptcy, all your debts will be written off and you’ll be officially declared debt-free. However, it will remain visible on your credit score for six years.
Entering into any debt solution will negatively affect your credit score, but lenders tend to apply stricter eligibility criteria to individuals who have been bankrupt. This is because it’s considered a last resort and essentially means you’ve exhausted all other options for dealing with your debt.
“No fuss, just simple, honest advice. Communication is good and they make the process as easy as they can.”
When does the debt time limit start and end?
The time limit for debt pursuit begins when the creditor’s legal right to take action against the debt begins. This typically occurs at the ’cause of action’, which is when the credit agreement states that the creditor can first take legal action.
It can also be ‘restarted’ at any point if the debt is acknowledged or paid. So, even if the debt is due to become statute barred in a few months, any attempt to pay the debt – no matter how small – or contact the creditor will set the timer back to the beginning again.
Once the time limit expires, the debt will become statute barred and your creditor will lose the right to enforce payment through the courts.
Remember, for a debt to become statute barred, you must not have acknowledged the debt, admitted to owing the debt, or paid the debt. It’s also important to note that you won’t be informed of a debt becoming statute barred, so it’s recommended to keep a note of the last time you dealt with the creditor.
Debt help tailored to you
From writing off a large portion of your debt, to readjusting your budget, we’ll find a solution that suits you.
I’m being chased for a debt after the time limit. What are my options?
Once the time limit on a debt has expired, creditors are legally prevented from pursuing repayment through any form of legal action, including a County Court Judgment (CCJ).
However, while there is no legal obligation to pay anything, creditors might still try to recover payment of statute barred debts through non-legal methods (e.g. a debt collection agency) and you might still receive communication from time to time. The only way to stop any contact from a creditor is to settle the debt.
The Consumer Credit Act (1974) exists to protect consumers from unfair lending practices and outlines consumer rights during certain credit card agreements. If you feel like you’re being harassed to pay a statute barred debt, you have the right to report the creditor to the appropriate regulatory body.
Should I wait for a debt to be automatically written off?
It can be tempting to wait for a debt to be automatically written off – especially if you’re nearing the end of the limitation period.
However, you should be careful if you find yourself in this situation, as most creditors will pursue all available avenues to recover the debt before the option is taken away from them and it becomes legally unenforceable.
It’s particularly dangerous to wait until a secured debt becomes statute barred as your home or car could be at risk of being seized at any point.
Regardless of whether it’s a secured or unsecured debt, your credit score will be harmed by any missed payments.
It’s widely acknowledged that your payment history is the single biggest contributing factor to your credit score. Missing payments will cause serious damage to your credit score for several years, which can prevent you from being able to get a loan, mortgage, phone contract, or even a bank account for several years.
As well as the financial consequences, waiting for a debt to be automatically written off can have a negative impact on your mental health and well-being as constant communication from creditors can quickly lead to stress and anxiety.
Can creditors take legal action against me for unpaid credit card debt?
In certain circumstances, creditors might resort to legal action to recover outstanding debts. This can involve obtaining a County Court Judgment (CCJ) against you, which can have long-lasting repercussions on your credit file and ability to obtain credit in the future.
Having a CCJ also prevents debt from becoming statute barred, meaning you can be chased for payment indefinitely.
However, legal action is typically considered a last resort, and creditors are required to explore alternative means of debt recovery before initiating court proceedings, whether through affordable repayment plans or debt collection agencies.
Conclusion
Credit card debt becomes statute barred and is automatically written off after five years in Scotland and six years in England and Wales. Before this, creditors can take legal action against you to recover payment.
However, even if a debt is statute barred, it still exists and your creditors can still chase you for it as long as they don’t take legal action against you to do so. This means that you might still receive letters or phone calls from creditors after the limitation period has expired.
If you feel like you’re being harassed for a debt that you can prove is statute barred, you can complain to the relevant regulatory body.
