Loan companies going bust and repoening

Supercue

My Brother took out a loan about 5 years ago with a loan company and after two monthly repayments they went bust.
This company has now reopened under a different name and is trying to reclaim the outstanding balance plus interest. Is this in order or is there a statute of limitations on this? Thanks for your help.

Tixy

If a loan company 'goes bust' the debts are usually sold to another company and he would have remained liable to pay the debt. Usually the new owner is entitled to continue to charge interest as per the original agreement - though it does depend on the loan agreement wording.

Whether that might be what has happened in this case would depend on what legally happened to the old company when you say it 'went bust'.

He has a right to ask them for proof of the debt - thats proof that he owes the money and proof that they have a right to collect the debt.

A creditor is entitled to chase him for the debt - and he can be taken to court for up to 6years from the date of the last payment or his last written acknowledgement of the debt.
Under the Limitation act after 6years he cannot be taken to court for the debt (or if they try to take him to court his defence would be that its been over 6years since he last paid or acknowledged the debt).

If they take him to court and obtain a CCJ against him before a 6year period since last payment/acknowledgement then the debt never becomes statute barred.

Supercue

Thanks Tixy. That was my first post and I think the wording was a bit muddled.
I should have said would it be reasonable after 4 years of no contact from the company to assume the debt had been written off?. However I would say that your reply still stands. Only problem now is my Brother's circumstances have changed from 4 years ago and he can't afford to repay it. Thanks again.

Tixy

Its ok for them to chase after 4years.
I guess it wouldn't be unusual to hope the debt had been written off - but that would have been very unlikely in reality.

If his circumstances have changed and he cannot afford to repay then he could work out how much he can afford a month and write to explain his situation and state that is all he can afford. He could also try asking the to freeze interest & charges (they don't have to but sometimes will if they think the debtor is paying all they can genuinely afford).
If he could get a lump sum together the other option might be to offer a reduced full & final settlement to them.

There are useful free letter templates on national debtline website to offer reduced payments and full & final settlements etc.