What are the time limits for paying back debt?

If a debt is barred under statute, it means that the creditor has run out of time to use certain types of action to try and make you pay the debt. The Prescription and Limitation (Scotland) Act 1973 explains this.  

The time limits are 5 or 20 years, depending on the type of debt and what has happened. They do not apply to all types of recovery action.  There are different rules about when the clock starts or stops running depending on the type of debt being collected and whether the 5 or 20 year rule is being used.

If the creditor has run out of time, you may not have to pay the debt back. 

Unsecured credit debts

Unsecured credit debts are things like credit cards, store cards and personal loans.

You can argue that the debt no longer exists after five years if all the following apply: 

• The creditor has not already obtained a decree (a court order for payment) or started court action against you. 
• You have not made a payment on the debt during the last five years. 
• You have not written to the creditor admitting you owe the debt during the last five years. 

Sheriff court decrees

If the creditor has been to court they usually have up to 20 years to start enforcing a court order for payment. 

Overpayment of social security benefits

A 5­-year limit applies to benefit overpayments that you have been given by the Scottish Government. These include the Best Start Grant and the Carer’s Allowance Supplement.

A 5-year limit does not apply to benefits that you have been given by the DWP, for example, Jobseeker’s Allowance, Employment and Support Allowance, Income Support or Universal Credit. It does not apply to benefits you have been given by HM Revenue & Customs (HMRC) either; for example, Child Tax Credit or Working Tax Credit either.

However, a 20-year limit does apply to benefits given to you by the DWP or HMRC, and it also applies to benefits given to you by the Scottish Government.

Council tax

Council Tax arrears can be recovered for up to 20 years. This time limit runs from the date of the final demand.

Income tax and VAT 

A 20­-year limit applies to income tax, VAT and National Insurance debts owed to HMRC.

Mortgage shortfalls

A mortgage shortfall can happen if your home is repossessed, and the sale did not raise enough money to pay off the mortgage. There are different legal views about whether a lender has  5 years or 20 years  to take court action about this.

Student loans

Student loan companies have 5 years to go to court about debt.