Key Post Does my debt just disappear after 6 years, if the bank does nothing or can't fit find

I have summarised the discussion from this thread.

A creditor has up to 6 years from the date of the accrual of a debt to take legal action.
If the creditor gets a judgment, it lasts for 12 years. (Well, after 12 years, you can apply to the court to have it removed)

If you sell your house and there is a shortfall on the mortgage and the lender does nothing about it, the debt will lapse after 6 years.

If the lender initiates legal action within 6 years and gets a judgment, the judgment lasts for 12 years.

So the unpaid debt could hang over you for up to 18 years.

If you write to your creditor seeking a deal, thus acknowledging the debt, you reset the 6 year clock.
If you make a payment to your creditor, you reset the 6 year clock.

When does the debt accrue?
When the house is sold. So if you throw back the keys and it takes the bank 5 years to sell it, then your debt could last 23 years.

So what should a debtor do if they want their debts to disappear?
Don't contact the bank to acknowledge the debt.
Don't make any payment at all.
Go to Australia as the bank is very unlikely to bother getting a judgment against you.

Come back after 6 years, debt-free.

Even after 6 years, you must not acknowledge the debt
The debt becomes statute barred after 6 years. Now there is nothing to stop them from writing nasty letters getting you to pay after 6 years are up. If you make a single payment or acknowledge the debt even after 6 years it resets the clock and makes the debt enforceable again.

It is important never to acknowledge the debt even after 6 years.

Consider the non-financial aspects of this
If the bank does get a judgment against you, it could well be a barrier to your getting a job in Ireland. It would be a direct barrier to a job as an accountant or solicitor, but many employers of other professions , might be reluctant to employ someone who is in financial difficulty.

If a mortgage holder sells their home and there is a shortfall, when does the debt become due?

If the agreement is to pay the shortfall over 20 years, does that mean that the date it becomes due is in 20 years?

mf's post from the original thread. The above is the summary of this.

In broad terms...............

See the Statute of Limitations 1957 - amended in 1991 and 2000.
Civil Liability Act 1961
Civil Liability and Courts Act 2004


A creditor can seek to recover a debt from a debtor for a period of 6 years from the date of the accrual of the debt. That date can be a different date for different debts - when does a credit card debt become due? At the date of the statement? When the debt is called in?

A debtor may also extend that time period by acknowledging the debt or making a part payment.

If a debtor does not pay, then a creditor can sue - within 6 years of the accrual of the debt. In broad terms, the debtor must be served (usually by registered post) with the Summons/Civil Bill and, in the High Court, a Summary Summons. Service of a Summary Summons is personal unless an alternative method is ordered by the Court. So the debtor must be made aware of the proceedings. Where service is not possible, a debtor can look for an order for substituted service - i.e. service by ordinary post, by advertisement in the paper etc.,etc. A Court should always be satisfied that a debtor has received notice of the proceedings.

If a debtor ( now a Defendant) does not defend the proceedings, a judgment will be obtained. A judgment lasts for 12 years only - after that it expires.
And no, there is no such thing as “just handing back the keys”. A mortgage attaches to a property but, except in very unusual circumstances, belongs to and will follow the property owner, unless agreed otherwise.
So, in answer to the above:

Johnny leaves Ireland for Australia owing unsecured debt of €5,000
Johnny just has a credit card and overdraft debt and leaves the country.
Does this disappear after a while?


The debtors have 6 years from the accrual of the debt to issue and serve the proceedings. An Irish Court probably does not have jurisdiction over a non resident for a debt and , for this amount of money, is unlikely to go to the trouble of issuing proceedings in Australia – if they can even track Johnny to an address.

So – Johnny does a runner and the debt dies after 6 years. So – any downside? If Johnny needs to come back? If Johnny cares about his ICB rating? Is it conceivable that if he looks for credit in Australia that someone could run a search on his Irish ICB?

Mary 1 has a shortfall of €100,000 arising from the shortfall on her mortgage.
She just gave the keys back to the bank. They sold the house and the shortfall is €100,000


She owes the bank €100,000.00. They can get a judgment against her. They need to have an address for her – or ask the Court to allow them serve her in an alternative manner. If she has other property assets, a judgment mortgage can be attached.

Mary 2 has a judgement against her for €150,000
Mary 2 handed back the keys but the bank registered a judgement against her.

As above.

Paddy has a judgement mortgage on his property of €30,000
A credit card company got a judgement against Paddy of €30,000 and registered it against his home. Does it disappear after x years?

It does not disappear- but it ceases to have any effect after 12 years. So, if he is selling 14 years after the judgment was obtained, he can take steps to have it removed.

Can the bank do anything to extend the statute of limitations?
If the bank continues to write to the debtor asking for the money does it keep it alive? When does the period start? Is it from the date the debt is incurred or the date the bank stops chasing it?


The bank can institute proceedings within 6 years of the accrual of the debt. That stops the Statute of Limitations running. The debtor can extend the 6 year period by acknowledging the debt (must be in writing)or part paying the debt.

mf

Good post Brendan.

The shortfall would become due once it is crystallized by a sale of the house.

The six year statute of limitations would run from that date. Usual caveats apply regarding acknowledgement and payments.

Great post Brendan - this is a very interesting thread as I imagine there are quite a number of people in this position (as is evident from AAM posters) where they're not too sure what is going to happen with them, moving abroad, judgements etc.

So my understanding is as follows:

A person has a €400k mortgage, sells property for €200k so owes €200k. No ability to repay this in any meaningful / material manner so cuts off all contact from the bank post sale of property. Regardless of whether they currently live abroad or move abroad, from the posts above the Bank can get the judgement in their absence either way (regardless of whether they know their address or not). As a result, two possible scenarios:

1) Best Case:
Borrower fails to acknowledge the debt & bank fails to act for 6 years from date of property sale which means after 6 years the Borrower could return to Ireland (albeit with a shot credit rating) debt free.

2) Worst Case:
Bank waits until the last minute of the 6 years, issues judgement which will take a further 12 years to expire so borrower has to wait 18 years before they can return debt free.

A couple of questions I have on the above then:
1) How long post judgement / walking away from the debt does it take ones credit rating to truely get clean again?
2) What are the implications of moving back to Ireland while the Judgement is still in force?
3) Does it make any difference at all if they know your address abroad?

1) The judgement will only show on the ICB for 6 years from when they register it.
The judgement can still be found by people who run judgement searches until the 12 years are up.

2) If the bank discovers you are in the country whilst the judgement is still live, they can then start enforcing it via the normal means normally by seeking an instalment order and threatening committal to prison if the order is not complied with. Returning to Ireland for holidays is not going to cause any issues.

3) If they know your address abroad they can hire the services of a tame local debt collector who will threaten all manner of things. In reality they can't do anything without expensive litigation in Ireland and then abroad so that a foreign court might recognise proceedings in Ireland. This is only reserved for people with visible assets that can be sold quickly. Brendan Drumm for example. A normal person need not worry. But it is always best that they don't know your address abroad.

So can I introduce another variable (great post by the way).

What happens if you give up the house to the bank unsold and it takes them a few years to sell it. What kicks in when?

Everything would date 6 years from when they sell the house.

Kine said:

2) Worst Case:
Bank waits until the last minute of the 6 years, issues judgement which will take a further 12 years to expire so borrower has to wait 18 years before they can return debt free.

Click to expand...

Can it be worse than this.

You agree to sell your house after 5 years of not being able to pay properly, takes a couple of years to sell, after sale the bank ignores you for just under 6 years and issues a summons for judgment, takes 2 to 3 years from then to get judgement. Judgment I understand lasts then 12 years. You're now back in employment/have inheritence/assets and close to year 12, bank issue instalment proceedings and after some time they get an instalment order. And the instalment decision allows you a basic sum to live on and everything else to the bank.

If the above scenario possible?

Bronte said:

Can it be worse than this.

You agree to sell your house after 5 years of not being able to pay properly, takes a couple of years to sell, after sale the bank ignores you for just under 6 years and issues a summons for judgment, takes 2 to 3 years from then to get judgement. Judgment I understand lasts then 12 years. You're now back in employment/have inheritence/assets and close to year 12, bank issue instalment proceedings and after some time they get an instalment order. And the instalment decision allows you a basic sum to live on and everything else to the bank.

If the above scenario possible?

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I suppose you are correct in theory - I was just going for the "I have just sold my house" approach, as simply handing the keys back to the bank is a bit of a "how long is a piece of string" like you have outlined above, who knows how it would go in that situation.

I'm wondering what happen's if a house doesn't sell after 6 years?

I'm in a voluntary surrender process at the moment with a buy to let. Their's a very good chance the bank wont be able to sell this property, so what happen's then? Do they just go with a auction type fire sale if the property shows no sign of selling normally? There is 160,000 on the loan and 6000 arrears increasing by approx. 650 per month.

The bank, IRBC , will not entertain a debt write off and my personal family home is in negative equity of 90,000 so their's no point in them going after that for now.

Any shortfall is only crystallised when the asset is actually sold.

So the statute of limitations only runs from this date.

Time said:

Any shortfall is only crystallised when the asset is actually sold.

So the statute of limitations only runs from this date.

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Right,thanks.

Think I could be waiting 66 years so not 6.

mark71 said:

The bank, IRBC , will not entertain a debt write off and my personal family home is in negative equity of 90,000 so their's no point in them going after that for now.

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Well you can be sure they'll slap a JM on it if they think you'll eventually have equity.

Quoted from the first thread

mf1 said:

The bank can institute proceedings within 6 years of the accrual of the debt. That stops the Statute of Limitations running. The debtor can extend the 6 year period by acknowledging the debt (must be in writing)or part paying the debt.

mf

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Hi mf,

When you say "in writing" does that have to be registered post or legal documentation? Does email count?

Any written medium would count.

You have to prove they acknowledged the debt. You could send 1000 letters but still not have an acknowledgement.

Ok, but I guess my question is, you could get an email but how does that verify the identity of the debtor or does that even matter?

You are dealing with civil courts where the burden of proof is on the balance of probabilities which is a much lower threshold than in the criminal courts where proof beyond all reasonable doubt is required.

I doubt an email would be enough in any event.

Brendan Burgess said:

So what should a debtor do if they want their debts to disappear?
Don't contact the bank to acknowledge the debt.
Don't make any payment at all.
Go to Australia as the bank is very unlikely to bother getting a judgment against you.

Come back after 6 years, debt-free.

Click to expand...

Australia (or any far flung place) - I presume that is easier than trying to hide in an EU country like the UK. Is that because it is much easier for the debt collectors to track folk down within the EU and attach judgments on future assets? If I had a judgement against me in Ireland, and wanted to buy an asset with my husband in say 7 years time by applying for a mortgage in London, for example, I wonder if the Irish judgement would then show up in my UK credit rating?

Debt collectors have no legal powers to attach judgements. Only the debt owner can.

An Irish judgement would be of no value in the UK unless the owner had taken steps to have it recognised in the UK.

As places to run to, any EU state would be good enough. The trick is not to apply for credit or have dealings with any banks that have offices in Ireland. If you stay off the credit radar abroad they are unlikely to ever find you.