DRO / IVA to include statute barred debts?

Badgerline

I have an existing debt management plan with Payplan due to end in just under 6 years, with around 8K left. Since this arrangement was made, I have added 9 k in debt from loans and credit cards.

I have a further 31K Cabot debt, passed on from a Northern Rock loan in 2008. That defaulted in about 2010 and doesn't show on any of my credit records, there is no trace of it anywhere. This was not included in the PayPlan DMP.

Stepchange and CAB have now given me different advice regarding options because of this. Stepchange said even if the debt is statute barred, I would need to include it in my overall debt when exploring solutions. CAB advised that the debt wouldn't be included if it were statute barred.

Can someone please clarify?

The other issue is that I can't be certain whether the debt is statute barred; Cabot is still sending me settlement offers by post. My partner was paying £1 a month on my behalf for a few months, which ended about a year ago as I didn't want any connection to him and my debt (he has a good credit record and is the sole person on the mortgage) I have no assets.

As my partner was paying the £1, can the debt not be statute barred? I haven't spoken to Cabot directly for a few years and don't want to contact them now in case the 6 years of no contact then needs to start all over again

Lastly! - In the circumstances, could I please have suggestions on whether a DRO, IVA or even asking PayPlan whether they will support with another DMP is best? I am trying to limit damage and need to consider any implications on my employment, i.e. would I need to disclose.

Any advice very much appreciated!

StepChange_Aidan

https://forums.moneysavingexpert.com/discussion/6685969/dro-iva-to-include-statute-barred-debts

Hi,

To clarify, StepChange would ask for details of all debts, including statute barred ones, so we fully understand your situation when we’re giving advice. But they would be excluded from debt solutions, and you wouldn’t have to list them on an IVA or DRO application if they are confirmed as statute barred.

Most types of debt become statute barred six years from the earliest date the creditor could have taken court action against you, the last time you acknowledged the debt in writing or the last time you (or someone acting on your behalf) made a payment, whichever of these was the most recent.

Once a debt is statute barred, it can’t become enforceable again. But if it wasn’t already, your partner making payments on your behalf could have reset the time limit.

There’s some more information about Statute Barred debts here.

If you’d like to continue with StepChange to review your options, please get back in touch.

Regards,

Aidan

sourcrates

The limitation period on loans is 6 years, was it a joint loan?

Any payment or written acknowledgement will re-set the limitation period with each event.

So for this debt to be statute barred there would have to have been 6 consecutive clear years since it defaulted, with no payments or written acknowledgement by you (and if joint) your partner also.

Statute barred debts are not included in debt solutions simply because a creditor has no right to enforce any agreement that has become time barred, CAB are correct in what they told you.

We would need to know the fuller picture in order to recommend any particular debt solution, it all depends on your personal circumstances, a fully complete SOA would give us that.

Badgerline

Thank you both very much! There's a likelihood that there was a 6 year gap somewhere between 2010 and 2018, after which I became worried with the continued calls and threats, so started the minimal payment. If the debt has had any 6 year period without contact, would that count? I am just wondering why the debt has disappeared from my credit records.

Badgerline

It is just my debt, not joint. Ideally a DRO seems preferable - cleared in a shorter period of time? Not sure I fully understand the implications or differences from an IVA.

If I access my Cabot account online (if that's possible) would this count as contact or does it need be direct acknowledgement in writing?

RAS

If there was a clear 6 years between payments sometime between 2010 and 2018, the debt became statute barred. It can't become "unstatute barred" afterwards.

But if you are in England or Wales, it remains "collectable" to quote many debt collectors. Just if you aren't mug enough to pay, they can't take any action against you. Except more letters and texts that you can largely ignore.

sourcrates

Defaulted debts only show on credit files for 6 years from the date of default, after that they are automatically expunged from your records forever.

Once a debt becomes statute barred, it cannot be "unbarred", it remains unenforceable forever basically.

What counts as acknowledgement ?

Only payment by the debtor, and/or written acknowledgement by the debtor, for example a letter, can re-set the time clock, logging into your Cabot account does not constitute acknowledgement.

I would proceed on the basis the debt is statute barred, and it would be up to the current owner of the debt to prove otherwise, you do not have to prove anything.

fatbelly

Statute barred debts in DROs are covered here

https://www.gov.uk/guidance/debt-relief-orders-guidance-for-debt-advisers#statute-barred-debts

Both CAB and Stepchange should be aware of the rules for DROs even though Stepchange are not allowed to do them

Badgerline

So helpful, am really grateful for all your insight, thank you very much!

ManyWays

@sourcrates said:
I would proceed on the basis the debt is statute barred, and it would be up to the current owner of the debt to prove otherwise, you do not have to prove anything.

That is not a safe approach to take when considering a DRO or an IVA. You have to choose at the start to list the debts or not list them. As the official guidance @fatbelly linked to says for DROs:

If there is uncertainty as to limitation, we recommend that all unpaid debts, including potentially statute barred ones, are scheduled in the DRO, especially if the inclusion of this type of debt does not bring the total to over £50,000.

That is what a debt adviser would see as the safe approach.

But I would add that is it HIGHLY unusual to be thinking of a DRO or an IVA. If you qualify for a DRO, that is the better option in 99.9% of cases. If you do not qualify for a DRO, but were borderline on the disposable income, or you owned a property, then an IVA may well be a disaster anyway and a more flexible DMP could be the better choice.