If you have unpaid debts in Scotland, you may be wondering if there is a time limit on when your creditor can take legal action against you. The answer is yes – there is a legal time limit known as the statute of limitations or limitation period. If your debt falls within the limitation period, your creditor can take legal action to recover the debt.
However, if the limitation period has expired, the debt becomes statute barred, and your creditor cannot legally enforce it.
In this article, we will explain everything you need to know about statute barred debt in Scotland, including what it means, how to check if your debt is statute barred, and what to do if you receive a debt collection letter or court summons for a statute barred debt.
What is Statute Barred Debt?
In Scotland, a debt becomes statute barred if the creditor has not taken any action to recover the debt within a specific period. This period is usually five years from the date of the last payment or acknowledgement of the debt. After the five-year period has passed, the creditor cannot take legal action to enforce the debt, and the debt is considered “extinct.”
However, it’s important to note that some types of debt have a shorter limitation period of three years, including:
- Council tax arrears
- Benefit overpayments
- HMRC debts, such as income tax or VAT
- Personal injury claims
It’s also worth mentioning that the limitation period may be different for debts incurred outside Scotland. For example, if you have a debt from England, Wales, or Northern Ireland, the limitation period may be different, and you should seek legal advice.
How to Check if Your Debt is Statute Barred?
If you’re not sure whether your debt is statute barred, the first step is to find out when the last payment or acknowledgement of the debt was made. This could be a payment towards the debt, a written acknowledgement, or any other communication where you admitted that you owed the debt.
Once you have this information, you can calculate whether the limitation period has expired. If it has, the debt is statute barred, and you are not legally obligated to pay it. However, if the limitation period has not expired, the creditor can still take legal action to recover the debt.
It’s important to note that some creditors may still try to collect a statute barred debt even though they are not legally entitled to do so. If you receive a debt collection letter or court summons for a statute barred debt, do not ignore it. Instead, seek legal advice to find out what your options are.
What Happens if a Creditor Tries to Collect a Statute Barred Debt?
If a creditor tries to collect a statute barred debt, you have several options, depending on the situation. Here are some of the most common scenarios:
You receive a debt collection letter for a statute barred debt
If you receive a debt collection letter for a statute barred debt, you should first check the date of the last payment or acknowledgement of the debt to confirm whether it is statute barred. If it is, you can write to the creditor to inform them that the debt is statute barred and that you are not legally obliged to pay it.
If the creditor persists in trying to collect the debt, you can report them to the Financial Conduct Authority (FCA) or the Scottish Financial Complaints Service (SFCS). The FCA regulates debt collection agencies, and the SFCS handles complaints about financial services in Scotland.
You receive a court summons for a statute barred debt
If you receive a court summons for a statute barred debt, you should seek legal advice immediately. A solicitor can help you prepare a defence and represent you in court. If the debt is indeed statute barred, the court should dismiss the case. However, if you do not attend the court hearing or do not defend the claim, the court may issue a decree against you, and you may be required to pay the debt.
You make a payment towards a statute barred debt
If you make a payment towards a statute barred debt, this could restart the limitation period, and the creditor could take legal action to recover the full amount. Therefore, it’s important not to make any payments towards a statute barred debt, even if the creditor threatens legal action.
What Should You Do if You Cannot Afford to Pay Your Debts?
If you are struggling with debt and cannot afford to make the payments, there are several options available to you:
Debt Management Plan (DMP)
A DMP is an informal agreement between you and your creditors to pay off your debts over a longer period. You make a single monthly payment to a debt management company, who distributes the money to your creditors.
Debt Arrangement Scheme (DAS)
DAS is a statutory debt management plan available in Scotland. It allows you to repay your debts over a longer period while protecting you from legal action by your creditors.
Sequestration
Sequestration is the Scottish equivalent of bankruptcy. It is a legal process where your assets are sold to pay off your debts, and your creditors are prevented from taking legal action against you.
Trust Deed
A Trust Deed is a legally binding agreement between you and your creditors to repay your debts over a fixed period, usually four years.
Conclusion
In summary, statute barred debt in Scotland refers to a debt that cannot be legally enforced because the limitation period has expired. If you receive a debt collection letter or court summons for a statute barred debt, seek legal advice to find out what your options are.
Remember, making a payment towards a statute barred debt could restart the limitation period, so it’s essential to check the date of the last payment or acknowledgement of the debt before taking any action.
If you are struggling with debt, there are several debt management solutions available in Scotland, such as DMP, DAS, Sequestration, and Trust Deed. These solutions can help you manage your debts and avoid legal action by your creditors.
