The pint of beer that saved one man £11,003.38
I was recently supping a pint of bitter in my local pub with a good mate of mine, when he suddenly blurted out that he hadn’t slept in a week after receiving a letter from a firm of debt collectors chasing him for a debt he acquired many years ago.
I must admit he did look a bit knackered, and while us blokes don’t normally talk about such things, he knows I work with people struggling with debt and wanted some advice.
The letter said that he had to pay £11,003.38 within 14 days or field agents would call at his home to discuss ways of paying the money back. What should he do: ignore it and hope it would go away again or pick up the phone and talk to the debt collection agency?
I asked what his missus thought; silly question as he admitted he daren’t tell her: “I don’t know what to do - we are struggling as it is, don’t need this,” he told me.
Turns out he’d got into debt before they’d even met, having fallen behind with his payments on a personal loan around eight years ago.
Now, this friend of mine has been married for over six years. The solution then began to look quite simple as, under certain circumstances, lenders are prevented from chasing borrowers for unpaid debts.
In short, should the lender fail to maintain contact with the borrower for a period of six years or more (and no payments have been made), then it is possible to claim that the outstanding debt is ‘statute barred’ under the conditions of the Limitation Act 1980.
The time scale, which mainly depends on the type of debt, begins when you last admitted to owing the money or made a payment. However, this time limit can be extended at the Court’s discretion.
Thousands of people receive requests for payments for debts, mainly on credit cards and loans, from lenders and debt collection agencies. Some demands are fair and reasonable but others are simply opportunist. Many threaten court action – even though they have no legal basis for this claim.
What is worrying is that many people actually respond to these letters because they do not know how to deal with them, and feel guilty or frightened by the implied threat of being taken to court.
My advice is to read any letters carefully and stay calm.
Just because someone has written to you demanding money does not mean you have to pay them.
You can download a free factsheet from Moneywise Debtwizard explaining how different types of debts come under the Limitations Act – this should help you weed out opportunists.
The factsheet also includes a template letter that you can send to any lender chasing you for ‘statute barred’.
I believe that we should always pay our debts, especially when we have the means to.
However, I do have an issue with lenders or debt collection agencies that chase debts even when it is not legally recoverable. Rules are made to benefit both parties - lenders know these particular rules only too well, so consumers now need to wise up to their rights.