Tie askew, hair still dripping from the shower, James wolfs down his cereal hoping to miss the worst of the rush hour traffic.
He hears a familiar dull thud as a thick wad of envelopes comes crashing through the letterbox and scatters across the porch.
“Bills, bills, more b… what’s this?”
URGENT: UNPAID DEBT
He opens the letter to find that a previous landlord is demanding rent arrears from nearly 6 years ago:
He feels hot, his heart beats faster… then faint, he can feel the blood drain from his face. How could this have happened? Why now? How would he afford it?
It’s a thought that would make anyone shudder. A debt that you didn’t even realise you owed has decided now, of all times, to rear its ugly head.
Don’t worry if you’re in a similar position to James. In this article, we’re going to explain what statute barred debt is in Scotland and how this piece of legislation may help you if you have creditors chasing you for old, unclaimed debt.
Statute Barred Debt (Scotland) Explained
In Scotland, there are laws designed to protect you from an unclaimed debt that is over a certain age.
In legal terms, we call this prescription. If a debt is prescribed, then the lender has a predetermined period of time to recover the debt before it becomes unenforceable.
A statute barred debt is a debt that can no longer be recovered by a creditor after the prescribed amount of time had passed, providing certain conditions are met.
Does the debt still exist if it is statute barred?
In England, Wales and Northern Ireland, a debt is unenforceable once it has been declared statute barred. This means that it a creditor can no longer pursue you for the debt, though it does exist and you are free to pay it off if you choose.
How long does it take for a debt to become statute barred in Scotland?
The duration of time after which a debt becomes statute barred in Scotland is set out in The Prescription and Limitation (Scotland) Act 1973.
There are two periods of prescription in Scots law, known as Short Negative Prescription and Long Negative Prescription. The time limit set depends on the type of debt you have.
In this instance, James’ debt falls under the Short Negative Prescription category.
Most unsecured debts are covered by the Short Negative Prescription. These are debts where a creditor has loaned you money but they don’t have a lien on anything. These include:
Secured debts are also covered by the Short Negative Prescription. These include:
Hire purchase debts
Unlike in England , Wales and Northern Ireland, where these debts become statute barred after 6 years, in Scotland, this occurs after 5 years.
Debts covered by the Long Negative Prescription include:
HMRC Tax credit overpayments
Social Security Benefit overpayments
Council tax arrears
These are debts which become statute barred after 20 years have elapsed.
What other conditions must be satisfied for a debt to become statute barred in Scotland?
To be classified as a statute barred debt, the following must also apply:
The debt must not have been acknowledged by the debtor
There must be no decrees on the debt (This is known as a county court judgement or CCJ in the rest of the UK)
The creditor has not made any contact with the debtor about the amount owed.
No repayments have been made
If the debt is in joint names, both parties must meet the above criteria.
When did my prescription period start?
As we’ve seen, James’ rent arrears fall under the 5 year rule.
In the case of rent arrears, the prescription period usually begins either when the last instalment was due or legal action commenced.
The prescription period on things like credit cards, loans and store cards begins on the date that the creditor is able to take legal action to recover their money. This may be after two or three missed payments, for example, and will be stated in the original contract.
For debts which come under the Long Negative Prescription rule, it is the date the court, tribunal or authority ordered the sum due.
What will reset the prescription period?
As discussed earlier, there are several conditions which must be met before a debt will be considered statute barred.
There are two instances in which the prescription period may be reset on a debt
A relevant claim is lodged by the lender
The debtor acknowledges the debt
A relevant claim may be when a creditor raises an action for, raises a petition for, or obtains a court order for the sequestration of the debtor.
It could also include executing recovery actions such as:
An acknowledgement of the debt may be made when a payment is made or when the debtor acknowledges in writing that the debt still exists, even if there is a disagreement about the amount owed. A payment made to the creditor by a debt management company, which may be part of a debt solution such as a Trust Deed or Debt Arrangement Scheme will also count as a ‘relevant acknowledgement’.
Should I ignore the debt in the hope it becomes statute barred?
This is not advised, even if you dispute that you owe it. The creditor is still likely to be charging interest and applying various charges and penalties for late payment, meaning the amount you owe will continue to increase.
Your creditor may still raise a court action before the end of the five-year period and obtain a court order, allowing them to pursue you more relentlessly.
What should I do if I think my debt is statute barred but I am still being asked to pay?
James’ landlord was persistent. Letters poured in for weeks, each sounding more aggressive than the last. Soon the debt collectors turned up.
He started to struggle with anxiety.
A few weeks later, he found out about statute barred debt.
Luckily, James’ landlord had not made any attempt to claim the money that he owed in the 5 years since he paid his last instalment of rent. With the help of a debt advice service, James was able to establish that his old debt was statute barred.
After James had ascertained that the 5 year limitation period had passed, he was able to inform his old landlord that he could no longer harass him for payment as the debt had been extinguished.
Prescription is a complex legal issue. It can be difficult to establish when your prescription period begins, so we would always recommend getting in touch with a specialist advisor to be on the safe side.
By writing a letter to a creditor regarding your debt without the advice of a debt specialist, you may inadvertently produce evidence of a relevant acknowledgement on your behalf, which could reset your prescription. Be wary of free template letters provided by disreputable sources, as these are often poorly worded.
If you’re experiencing debt problems or if you believe your debt is statute barred but you’re still getting hassled by a creditor for payment, get in touch with Scottish Debt Expert now for debt help and advice.
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Barry John Stewart and George Dylan Lafferty are authorised to act as insolvency practitioners in Glasgow and the UK by the Institute of Chartered Accountants of Scotland (ICAS).
1 According to the Annual Report from the Accountant in Bankruptcy. (https://www.aib.gov.uk/about-aib/statistics-data/aib-annual-reports-1986-present)
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