Debt and Liability
Sometimes people are pursued for debts that, in law, they do not have to pay. Having to pay a debt is known as being liable for it. There are several reasons why you might not be liable for a debt.
If you think there may be a legal reason why you should not pay a debt you should get advice.
It is someone else's debt
If you are asked, in error, to repay a debt that is not yours you should explain to the creditor that they have probably sent the papers to the wrong address or wrong person. If that fails, ask for copies of all relevant papers and agreements and use these to prove that you are not the debtor.
If someone has taken out credit in your name and signed an agreement without your knowledge or permission, you will not be liable. The person who has taken out the credit has probably committed fraud, which is a criminal offence. The credit company is likely to pursue you for the debt unless you report the fraud to the police.
With credit debts, if you have not signed an agreement, you cannot be liable for the debt. This doesn't apply to all debts, for example Council tax, Income tax, VAT, court fines, Child Support and utilities debts. These can all be owed even if you have not signed for them.
Genuine mistakes on a bill do not necessarily make it invalid.
I was under 18 years of age when I took out the credit
If you were under 18, there are some circumstances when you will not be liable to repay the loan. Usually it depends upon what you bought or whether the loan was guaranteed by someone over 18 (a guarantor). If there was a guarantor then they may be liable to pay off the debt. If there was no guarantor and the court agrees you do not have to repay the loan, you may still have to return the goods.
Put under pressure to sign the written agreement (undue influence)
If you are put under a lot of pressure to take out credit, and this is done unfairly, you may not be liable. This includes:
- being bullied or forced into signing an agreement, or
- being persuaded by someone you trust who may not have your best interests at heart, or
- being persuaded by someone who doesn't give you all the information you need to make an informed decision
This is a complex area known as undue influence. If you think you are in this situation, you should get help from a solicitor or a debt adviser.
Note: You should always consider getting independent advice if someone asks you to sign a contract that secures a loan against your property
I have learning difficulties, mental health problems or drug or alcohol problems
Some people can be seen as being incapable of making a legal contract (eg a loan, credit card agreement etc). They may not, therefore, have to pay back the debt if it can be argued that the creditor should have been aware of the health problem when the contract was signed. This is also a complicated area so you should get an opinion from a specialist debt adviser.
The goods or service that I bought were faulty
If you buy goods or services on credit (for example store credit, hire purchase and credit card) then the bank or financial service providing you with the credit is jointly responsible for the standard of the goods or services. The supplier of the goods or service eg a shop or travel agent is the other responsible party. If the goods or services are faulty, you have the same rights to claim your money back from the credit provider as you do from the supplier of the goods or service. This may mean that you cannot be legally forced to pay off the debt.
I shouldn't have to pay Council Tax or I am entitled to a discount
Some people are exempt from paying Council Tax. This means they do not have to pay it. Other people are entitled to discounts on their bills. With proof, a right to exemption or a discount can sometimes be backdated. This means you may be able have some or all of an existing debt written off. The main exemptions and discounts are for:
- Vacant dwellings
- Dwellings inhabited only by students
- Dwellings specially adapted for disabled people
- People in prison
- People with severe mental impairment
- Hospital patients
- People in residential care
I didn't sign the written agreement (usually catalogues)
If a creditor wants to take you to court because of an unpaid consumer debt, there is a legal requirement that your written agreement with the creditor must be signed. A large number of catalogue companies don't ask customers to sign an agreement when they start providing credit. If you have an unsigned agreement and you bring this to the attention of the court, an order cannot be made against you. However, the court will still make an order against you if you don't let it know
Note: Any agreement signed or taken out after 6th April 2007 may still be enforceable even if it has not been signed or worded properly - a court would have to decide what was fair in each situation. Some credit companies may ask you to sign new agreements after April 6th 2007 which will replace older agreements - be careful if signing these, as it will prevent you from challanging any problems with the original agreement Where there is no agreement at all, any action against you can be challenged in court and nothing else can be done to enforce payment.
The written agreement has not been completed properly
As with signing written agreements (above), there are regulations that state what must be included in a consumer contract. Some of these, such as giving the APR (Annual Percentage Rate) and details of repayments, are essential for an agreement to be enforceable through the courts. Other details are not essential, but it is still up to the courts to decide whether it is fair to allow enforcement. It is usually best to get advice if you think an agreement might not be enforceable because it hasn't been completed properly.
Time limits for recovering debt
There are strict time limits for court action to be taken to recover debts. For most contract debts, this limit is six years, but for debts secured against property, it is twelve years. If court action has been started against you within the time allowed, then the time limit no longer applies for further recovery action. This means the creditor can continue to chase you for the money owed.
The time limit for taking action against you starts running from whenever the debt was last acknowledged by you. This is usually when you have either made a payment or written to a collector about the debt. If a collector contacts you this does not count as you acknowledging the debt.
Once the time limit is up, you can defend any court action and the debts cannot be enforced.
My debt is shared with someone else (joint and several liability)
Joint and several liability is the term commonly used when two or more people share a debt. It means that each person is individually liable to pay the whole amount borrowed. This could become a problem if, for instance, a couple have a joint bank loan and one of them goes bankrupt. The lender could still pursue the other partner for all the money that is due on the loan and not just their share of it.
Some people think if they have taken out a joint loan that they only, personally, owe half the money borrowed. This is not the case.
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Information Provider:
Manchester Advice
Date Written:
14 April 2005
Date Reviewed:
17 November 2008
This information is for guidance only and is not an authoritative statement on the law. Please read our Terms and Conditions.
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