If someone you owe money to agrees to write off your debt, it means you do not have to pay it back and they will not be able to chase you for it in future. Creditors will only agree to this in exceptional circumstances, however it is also possible to have your debt written off through legally-binding insolvencies such as bankruptcy.
How do I get my debts written off?
Although it is rare for a creditor to write off your debts without going through an insolvency procedure, it is always worth asking.
They are only likely to consider doing this in extreme circumstances in which there is very little chance of you paying any of the debt back, so pursuing it would be a waste of their time and money. These may including:
- You have no assets and your income only covers your basic needs.
- You are seriously ill or have a disability that means you cannot work.
- All your income is from benefits and you are unlikely to be able to boost your income, for example you are a pensioner.
- Other creditors have written off your debt.
- The person in debt has died and left no money or assets that can be used to pay the debt.
To ask for your debt to be written off, use a sample letter such as this one by National Debtline. You will need to include evidence such as your budget, a letter from a doctor confirming your condition or a death certificate. If you jointly owe money, your creditor can write off your part of the debt and still chase the other party.
Your creditor may agree to a partial write-off. This means you will only pay some of the debt, which is most likely to be an amount you can afford once you’ve paid all your essential bills. Whether you agree to a full or partial write off it is important to get it in writing, so you cannot be pursued for the written off amount at a later date.
Impact on your credit rating
Although credit reference agency reports will show you are not in debt, the write off may show as a default. That means people checking your credit history will be able to see that you have borrowed money but not paid it back.
It will stay on your credit record for six years, which could make it difficult to get a loan such as a mortgage during this time.
How long before a debt is written off?
Most debts have a time limit. If creditors do not attempt to recover it within that time by taking you to court, it will become statute barred. This means they cannot pursue you through the courts for it. But if you have been given a court order within the necessary time there is no limit on when the creditor can enforce it.
The time limit varies depending on the debt, but for most it is six years. If you make a payment or contact your creditor in writing during this time, it can reset the clock so you should think carefully before acting. If you are unsure of the best way forward you should speak to a free debt support charity.
For mortgages, the time limit is six years for the interest on the amount you owe and 12 for the actual amount.
If HMRC decides to investigate your tax affairs it can go back four years to reclaim money not paid because of an innocent error. For negligent tax returns, that have either not been submitted or are based on badly kept records, they will look back six years. If they suspect deliberate tax avoidance they can go back 20 years.
If a utility company has made a mistake on your bill or not billed you at all, they cannot backdate what you owe more than a year.
Other options to consider
There are lots of ways to manage debt if your creditors do not agree to write it off. These range from debt management plans, which help you pay off the debt in full over a longer period of time, to types of insolvency which will result in some or all of your debts being written off but come with strings attached. Insolvency options include:
- Debt relief order (DRO) – if you owe less than £20,000, have few assets and little income you can apply for a DRO. This will pause your debts for 12 months, after this time if the DRO has been approved your debts will be written off.
- Individual voluntary agreement – this is a legally-binding agreement with your creditors that freezes your debt and allows you to pay off as much as you can for between five and six years. You may be asked to remortgage your home to help you pay your debt, but you will not be forced to sell it.
- Bankruptcy – usually the last resort when you cannot contribute anything to paying off your debts. It can be completed in a year after which your debts will be written off, but you are likely to be forced to sell most of your assets, including your home, as part of the process.
In all cases, you will be included on the Insolvency Register for the duration of the insolvency proceedings and for three months after. Your insolvency will also show on your credit rating for six years. This will make it difficult for you to borrow money and may make you ineligible for certain jobs.
Deciding which way to turn can be difficult and will have a big impact on your life. So always seek free professional advice before making your decision.
Working with us
Sometimes selling your house quickly is a good way to improve your financial situation. If you own a portion of it without a mortgage, this will release that value for you to use. We can buy your home in just seven days if necessary and because we only ever buy with our own cash funds you can be confident the sale won’t fall through. We’re never part of a chain.
It could also be a good option if you are struggling to cover your mortgage payments or if you’ve inherited a home and want to sell it quickly to cover debts. We’re experienced at dealing with sensitive house-selling situations such as those involving divorce and go out of our way to make the process as stress free for you as possible. In addition, we do not charge estate agent or solicitor fees.
If you think we can help, please get in touch for a chat.