Confusion over 6 year drop off rule

dod929

I went to citizens advice for some advice re full and final settlements or pay small monthly payments to prevent the worry of a CCJ as is 5 years since the default was recorded.

They told me that they will only drop off my credit file 6 years from when I last made contact or payment, is this true as I thought it would drop off no matter what happens 6 years from the date of the original default? TIA!

wrigglepig

I believe the CAB is correct here though someone more qualified may be able to shed more light on this.


I think that the statute of limitations to make a claim for a debt which is recorded in contract*, (which for the purposes of your example I'm going to assume it is?) is 6 years from either the beginning of the most recent demand for payment, or when the most recent payment or acknowledgement of the debt was made. So if you've made a payment or even just stated that you're aware you need to make payments but presently are unable to do so, then this is when the clock starts ticking, so to speak.


*this is important, because if it is a verbal debt (between friends etc), or a debt with no fixed repayment schedule in a contractual form, the 6 years would begin from the initial claim of the debt.

sourcrates

Hi,


The default will drop off your credit file 6 years from the default date regardless of anything else that happens.


I think the CAB must of been confusing defaults with the Limitations act.

Doesn't matter if you pay it, settle it, or ignore it, it will be gone from your file after the 6 years are up.

If they took legal action, the default would still vanish, but the CCJ would be recorded for 6 years in the "public info" section of your file.

The poster above appears to have confused the default on your credit file, with the Limitation period as well, both are separate things.

National_Debtline

Hi dod929


It sounds as though the adviser you dealt with got their wires crossed.


As you rightly state, a regular credit debt will disappear off your credit file altogether six years after it has defaulted, regardless of whether there is still a balance outstanding. The only way that its effects on your creditworthiness can be prolonged is if it becomes the subject of a CCJ.


The time a creditor has to start proceedings to obtain a CCJ is a separate matter. For most kinds of simple contract debt, this six-year clock will start ticking from the "cause of action". This is usually the date of the first missed payment, and will therefore usually be a lot earlier than the date of any default.


It looks like the adviser has confused the two issues here. I hope things are clearer now!


Dennis
@natdebtline


EDIT - cross-posted with Sourcrates but the advice is the same.

dod929

Thank you ! Could they get a CCJ if I am making agreed payments?

National_Debtline

dod929 wrote: »

Thank you ! Could they get a CCJ if I am making agreed payments?

There's nothing stopping them doing so in theory, but in most cases it would hardly seem worthwhile if the debtor is already engaging with them and is paying what they can afford.


Dennis
@natdebtline

fatbelly

dod929 wrote: »

Thank you ! Could they get a CCJ if I am making agreed payments?

The answer is mostly yes. But I'm going to give you a longer answer on this!

You originally said "advice re full and final settlements or pay small monthly payments to prevent the worry of a CCJ as is 5 years since the default was recorded."

Incidentally, you should complain about the muddled advice you received from CAB as someone there needs training.

The debt (or debts?) were defaulted 5 years ago. Have you paid anything since then? If not they will be getting near to being statute barred (or if you are in Scotland they already are statute barred).

If you get to six years (5 in Scotland) without you making a payment or acknowledging the debt in writing then you have a complete defence to any court claim.

If you make a "small monthly payment" before the 6 years is up then you lose that possibility of defence - you restart the clock.

If you want to negotiate "full and final settlements" then you should do this using national debtline factsheet guidance, which includes a template letter headed 'without prejudice' - this would not restart the clock as that header prevents them using it in court proceedings.

The danger with "small monthly payments" if we are talking about token payments is that they continually acknowledge the debt, do not pay it off in a reasonable timescale and there is no evidence that they lessen the likelihood of a creditor taking court action - they would do this in order to get payment over a realistic timescale (3-5 years), or to access your wage, your assets or secure the debt against your house.