If you do not make a payment on a loan for over 4yrs what happens?

Question

A loan with a high street bank has not been paid in over 4yrs, however the bank have chased it. My question is that I am somewhat sure that if no payment has been paid in 5yrs then they will write off the debt. Is this the case. So far the bank have not pursued this large debt through the courts?

Answer 1

5 years in Scotland 6 years England and Wales and that goes from the last date you or they made contact.
The Limitations Act 1980 outlines the time limit within which a creditor can chase a debtor for outstanding debts. The Limitations Act 1980 only applies when no contact has been made between the creditor and debtor within the given time limit and only applies to residents of England and Wales.

Creditors are given a fixed period of time to chase their debtors, which is outlined in the Limitations Act 1980. The time scale mainly depends on the type of debt and can be extended at the courts discretion. The time limit begins when you last admitted owing the money or made a payment.

Should the creditor fail to maintain contact with the debtor, for a period of 6 years or more, it is possible to claim that the outstanding debt is "Statute Barred" under the conditions of the Limitations Act 1980.

The Limitations Act 1980 also has additional effects, depending on the type of debt in question:
Unsecured debt
You may have assumed that your creditor has "written-off" a debt if you have not heard from them for a long period. In many cases, it could be down to your failure to inform them of a change of address, but the debt will still exist and creditors are entitled to chase the debt indefinitely (even after the debt has become Statute Barred), however they can only use the legal system to recover the monies for up to 6 years after the last payment was made to the account.

Remember, creditors are still able to pursue an unsecured debt if:

They have previously obtained a judgement against you (a CCJ);
You have made a payment to the account within the last 6 years (this includes anyone else named on the credit agreement)
You have established any contact with the creditor (this can be a phone call or letter to request a balance or change your details), except to deny that the debt exists.
If a creditor continues to contact you after accepting that a debt is Statute Barred and you have stated that you no longer intend to pay the debt, you may be able to claim harassment contrary to section 40 (1) of the Administration of Justice Act 1970

Answer 2

If you have an account with a balance that has not been paid on for 4 years and are just now hearing about it again chances are it has already been sold to a debt collection agency. Contact the person currently holding the debt (who ever just notified you) and see if you can work out a repayment plan. If you have some money in savings most times you can settle the debt by paying a portion of what is owed. It will reflect badly on your credit report but you can look at it as a grey mark rather than a big black mark because making at least SOME attempt at paying a debt is better than none.

The reason the bank has not pursued your "large" debt through the courts could depend on how "large" it actually is. What seems large to you and me can sometimes actually be small to a large bank, so most times it is not worth the legal costs associates with pursuing the debt to take it to court. However if it is a large debt and somewhere along the lines they do sue you you risk loosing any large assests (such as your personal home or any property you own) that you hold. My best recommendation would be to find someway to resolve the debt either through a re-payment agreement or a settlement. Keep in mind no matter if they are activly pursuing your repayment or not, you borrowed this money and it is your responsibility to pay it back.

To answer your question if it is a large debt like you said, they won't just "write off" the debt but will sell it to a collection agency, the debt will continue to be re-sold until some one down the line actually takes action against you. You should make arangements to pay it off before they start adding legal fees.

Answer 3

Writing off the debt would be a possible business decision the bank would make. They may also choose to sell the debt to a collection agency. I'm not sure if I'm reading this right, but in case you think otherwise, if they actually do decide to write off this debt, it is NOT a good thing; it won't mean your credit is clean of this debt, and they will report your inability to pay off that debt to the credit bureau.

They most likely have already made a report about this to the credit bureau (you can check this for yourself). Abandoning your debts does not look good to other prospective lenders. You should probably approach the lender and see if you can work out a payment arrangement. If you are unable to pay because of insolvency, you might wish to visit a Trustee in Bankruptcy and discuss your options. Most Trustees offer one free session to discuss your options.

Once you'vre resolved this, you would at least be able to start rebuilding your credit.

Answer 4

Several things will or could happen here.

They WILL persue it eventually, they persue everything in the end.
The debt will get bigger (interest and charges).
It may get sold on to a debt enforcer.
It will NOT be written off after five years.
It will go on your records with companies like Experian.
When it goes through court, registered bailiffs may collect it.

My suggestion ? if you dont understand the legal or financial side, get financial advice (debt councelling), make sure you do owe it ( you'll know ) and if you do then start making even small payments, approach the bank and agree to start paying what you owe before things really get out of hand.

Trust me, once debts like this start to come home, they are relentless, and you end up in a deeper and deeper hole.

Answer 5

They will mark a default against the person who took the loan out and pass on the debt to debt collection agancy who will hound them for money,they will not write debt off,default will be on creditfile for 6 years from the date they file it as defaulted

Answer 6

The debt is sold on to collection agencies if they don't recover the money they sell it on and so on and so on until the debt istoo small to bother with which usualy around 5 years.

Answer 7

No my mum owes a bank loan from 15years ago and they only just started chasing her about it!

They come when you least expect it

Answer 8

They will attempt to collect it or ruin your credit for not paying it. They may have already done so check your credit report. They will mostlikely attempt to get it in collections and you will pay the price in your pocket and also your credit report.