Debt Law in the UK, Your Rights and Options as a Debtor

If you owe money in the UK, your creditors can take legal action to recover it. But you have rights, time limits exist, and insolvency options may apply. This page explains the system: what types of debt exist, how the court process works, what the FCA requires of lenders, and what formal solutions are available to you.

The short version

Debts in the UK fall into two categories: regulated (covered by the Consumer Credit Act 1974) and unregulated. Most consumer debts are regulated. A creditor cannot sue after six years of no contact (statute of limitations). If they do sue, you can defend in county court. If you cannot pay, you can explore an IVA (individual voluntary arrangement), DRO (debt relief order), or bankruptcy. Creditors must treat you fairly, respect your vulnerabilities, and follow strict debt collection rules.

At a glance

Regulated vs unregulated debt

The Consumer Credit Act 1974 (as amended by the Financial Services and Markets Act 2000) divides consumer credit into two camps.

Regulated debts are those where a lender provided you credit, and the original agreement was regulated by the FCA. This includes credit cards, personal loans, payday loans, store cards, overdrafts, and car finance below certain thresholds. For these debts, the lender must:

• Provide clear terms and conditions upfront
• Behave fairly towards you (FCA Treating Customers Fairly principle)
• Not engage in aggressive or abusive collection tactics
• Respect your right to early repayment
• Give you prescribed information before taking enforcement action

Unregulated debts fall outside the Act. These include mortgages (which have separate FCA regulation), business loans over GBP25,000, council tax arrears, court fines, and student loans. Unregulated debts follow different rules: the lender has fewer disclosure obligations, but you still have statutory rights via the courts and common law.

For both categories, the basic right to sue in the county court is the same. But the FCA's authority to investigate complaints and impose sanctions applies only to regulated debts.

Statute of Limitations: The six-year rule

One of your strongest defences is the statute of limitations. In the UK, a creditor cannot sue you for money owed under a simple contract (credit card, personal loan, overdraft) after six years have passed since the debt became due or since you last made a payment or acknowledged the debt.

This is governed by the Limitation Act 1980, Section 5. If a creditor tries to sue you more than six years after the date of last contact or payment, you can ask the court to strike out the claim as time-barred.

How the clock resets: The six-year clock starts from the date the debt fell due (typically the last payment date if you had an instalment arrangement, or the date the lender demanded repayment). The clock can be reset if you:

• Make a payment
• Provide a written acknowledgement of the debt
• Admit the debt in correspondence

If you have made no payment or contact in six years, the debt becomes statute-barred. Creditors often know this and may attempt to contact you to try to get you to acknowledge the debt and restart the clock.

Specialty debts: Some debts (typically those signed under seal or as a deed, rare for consumer credit) can be pursued for 12 years.

The county court debt process step by step

If a creditor decides to pursue you legally, they will file a claim in the county court. Here is what happens:

1. Claim issued

The creditor serves you with a claim form and particulars of claim, which set out the debt, the date it fell due, and the amount owed. You will have a deadline to respond (usually 14 days).

2. Your response options

You can:

• Admit the debt and ask for a payment plan
• Defend the claim if you believe the debt is not valid (for example, if it is statute-barred, the amount is wrong, or the claim is against you by mistake)
• Do nothing, in which case the court may enter a judgment by default against you

3. Judgment

If you admit or do not defend, the court issues a judgment. This is a court order saying you owe the money. It does not go on your credit file immediately; instead, it is recorded in the Register of Judgments, Orders and Fines for six years.

4. Enforcement

Once a judgment is entered, the creditor can use various enforcement methods:

• County court bailiff execution (seizing goods from your home)
• Attachment of earnings order (deducting from your wages)
• Third-party debt order (freezing your bank account)
• Charging order (placing a charge on your home)

The creditor must serve you with an enforcement notice before taking action.

FCA rules for lenders and debt collectors

The FCA (Financial Conduct Authority) sets and enforces rules on how lenders and debt collection agencies must treat you. The Treating Customers Fairly (TCF) principle requires firms to act in your best interest.

Vulnerability: The FCA recognises that some customers are vulnerable (due to age, health, financial literacy, or life circumstances). Lenders and collectors must identify vulnerability and adjust their approach: for example, offering longer payment plans, not pursuing enforcement at certain hours, or signposting free advice.

Debt collection standards (CONC 7): The FCA's Conduct of Business rules ban:

• Threatening or abusive behaviour
• Contacting you at unreasonable hours
• Failing to identify themselves
• Applying unfair charges or interest on top of the original debt
• Contacting third parties (except to obtain your contact details)
• Taking action without giving you a chance to respond

If a debt collection agency breaches these rules, you can complain to the FCA and seek compensation.

Debt collection agencies and your rights against them

Many creditors outsource debt collection to specialist agencies. Debt collectors are regulated by the FCA if they are collecting consumer debts on behalf of a regulated lender.

Your rights:

• Request a notice of assignment (proof that the debt was sold to the agency)
• Demand proof of the original creditor's claim (statements, contract)
• Complain if the agency ignores your requests for payment holidays or disputes
• Report the agency to the FCA if they breach CONC rules
• Use a cease communication notice to stop them contacting you (they must then contact only your solicitor or if enforcement action begins)

A cease communication notice does not stop the debt from being pursued; it only halts direct communication. The creditor can still issue a claim.

Insolvency options: Debt Relief Order (DRO)

A Debt Relief Order is a formal insolvency procedure for people with debts they cannot pay and few assets.

Eligibility:

• Total debts do not exceed GBP15,000
• You have minimal disposable income (less than GBP50 per month after essential living costs)
• You own little or no property
• You have not had a DRO in the previous six years

Process:

You apply through an approved intermediary (often a free debt charity such as StepChange). If approved, the DRO lasts one year, during which creditors cannot take enforcement action. After one year, qualifying debts are discharged (written off).

Downside: A DRO appears on the Insolvency Register for six years and affects your credit file. You cannot act as a company director during the DRO period.

Insolvency options: Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement is a formal agreement between you and your creditors to pay back a portion of your debts over a fixed period (typically 5 or 6 years).

How it works:

• You propose a payment plan (often GBP50 to GBP200 per month) based on what you can afford
• Your creditors vote on it (creditors owed 75% or more of the debt must approve)
• Once approved, the IVA is binding on all creditors (even those who voted against it)
• You pay a monthly sum; the debt adviser manages distribution

Advantages:

• Debts are frozen (no further interest accrues)
• Creditors stop pursuing enforcement action
• After the IVA ends, any remaining debt is written off

Disadvantages:

• The IVA appears on your credit file for six years
• You must stick to the payment plan; missing payments can lead to failure
• Directors disqualification applies in some cases
• The process requires professional advice (often via a debt adviser)

Insolvency options: Bankruptcy

Bankruptcy is a formal court procedure available if you cannot pay your debts. You apply to the court or your creditors can petition against you.

Process:

• You file a bankruptcy petition in the county court
• The court issues a bankruptcy order
• All your debts (except certain types like student loans and fines) are discharged
• Your assets may be sold to pay creditors
• After one year, you are automatically discharged (unless the court orders a longer period)

Advantages:

• Most debts are written off
• Creditors cannot pursue you further
• You get a fresh start

Disadvantages:

• Bankruptcy appears on your credit file for six years
• Certain assets may be seized
• You cannot act as a company director
• Some professions (law, accountancy) restrict bankrupt individuals
• Mortgage lenders and insurers will be hesitant to work with you

Who can petition for bankruptcy against you: Creditors owed GBP5,000 or more can petition if you cannot pay. You will be given a chance to propose an alternative arrangement.

Insolvency options: Breathing Space (Debt Respite Scheme)

The Breathing Space Scheme (introduced 2021) offers a legal pause if you are struggling to manage your debts and seeking advice.

How it works:

• You register for a 60-day breathing space period
• Creditors must stop all collection action and interest
• You get time to seek debt advice and arrange a plan
• After 60 days, you can extend (if conditions are met) or move into a formal solution (IVA, bankruptcy, etc.)

Eligibility:

• You must be in financial difficulty
• You must be receiving advice from an approved provider (e.g. Citizens Advice, StepChange)
• You have not had a breathing space in the last 12 months

This is often a first step before IVA or bankruptcy.

What you should never do

Ignore court papers: If you receive a claim form, respond within the deadline. Ignoring it leads to a judgment by default, which is harder to overturn.

Give creditors a blank cheque or standing order: Never set up a payment arrangement you cannot afford. Missing payments breaks the arrangement and allows creditors to pursue enforcement.

Sign anything under duress: If a debt collector pressures you to sign an agreement at home, take a photo, refuse to sign, and report them to the FCA.

Admit the debt without verifying the amount: Always ask for proof. Request the original contract, recent statements, and a detailed breakdown of the claim. Disputed amounts can be challenged in court.

Borrow more to pay debt: Taking out payday loans or high-interest borrowing to pay creditors often makes the situation worse. Seek advice instead.

Free debt advice services

Several UK organisations offer free, impartial advice:

• StepChange Debt Charity: 0800 138 1111 | www.stepchange.org
• National Debtline: 0808 808 4000 | www.nationaldebtline.org
• Citizens Advice: www.citizensadvice.org.uk (local office finder)
• Money Saving Expert: www.moneysavingexpert.com (guides and forum)
• BBC Money Helper: www.bbcmoneyhelper.org.uk

All are free and confidential. Many can help you draft a payment plan or register for breathing space.

Common misconceptions

"Once I am six years on, the debt disappears." True and false. If six years pass with no payment or acknowledgement, the debt is statute-barred and cannot be sued. However, it may still appear on your credit file and creditors can still ask you to pay voluntarily.

"A CCJ ruins me forever." A County Court Judgment stays on your file for six years, not for life. After six years, it is removed (assuming it is marked as satisfied). New lenders will be cautious, but it is not a permanent ban.

"Bankruptcy means losing my house." Only if you own a house with equity. Your main residence is usually protected to a value of GBP300,000 (as of 2026). Rented properties are not at risk.

"I can negotiate my debts down without going insolvent." You can, but creditors are under no obligation. Many will work with you if you propose a realistic plan. Debt charities can help open these conversations.

"Debt collection agencies can seize my possessions without a court order." Unlicensed bailiffs cannot. Only county court bailiffs with a court-issued warrant can execute goods.

Related concepts

Learn more about specific debt situations and remedies:

• County Court Judgment (CCJ): How they are registered and removed
• Statute-barred debts: The six-year rule in detail
• Enforcement: Attachment of earnings, charging orders, seizure
• Credit cards: Regulated debt, chargeback rights, PPI claims
• Mortgages: Possession orders, shortfall claims, negative equity
• Council tax arrears: Liability order process, bailiff powers
• Payday loans: High-interest lending, FCA lending standards, affordability checks

Sources

• Financial Conduct Authority (FCA). Consumer Credit Act 1974 and CONC rules. https://www.fca.org.uk
• GOV.UK. Debt and insolvency guidance. https://www.gov.uk
• Citizens Advice. Debt law and options. https://www.citizensadvice.org.uk
• UK Legislation. Limitation Act 1980. https://www.legislation.gov.uk

Disclaimer

This page provides general information about UK debt law and is not legal advice. The law is subject to change. Court procedures and insolvency rules vary by jurisdiction and are regularly updated. If you are facing debt, contact a free debt adviser or solicitor for advice tailored to your situation.

Written by Peter Kolomiets, founder of CaseCalm. UK debt law reviewed 2026-05-28.