Can You Really Write-Off Your Loan or Credit Card Debts?

What does the statement "Write off your debts legally" really mean and is there really such a thing as a "loophole" that allows you to get your debts written off? As usual, all is not what it may seem.

I doubt that there is anyone in the UK that hasn't seen an ad somewhere or other that claims to be able to eliminate your debts legally. Personally, I've seen hundreds if not thousands by now. In the newspapers, on the TV, on the Radio, on the Internet… Everywhere! But what does it actually mean and can we really eliminate some of our debts that easily?

Don't bank on it. It's all based on your ability to prove that there is something amiss with your original credit agreement that allows you to have it declared null and void. So basically it's a bit like the solicitor to the stars getting their client off of a speeding charge on a technicality. That's pretty much the premise of this whole concept - getting your loan invalidated on the basis of an error when the original credit agreement was drawn up.

Much reference is made to the year 2007 and ads often claim that loans drawn up before then may be unenforceable. The reasoning behind this is that the 'Consumer Credit Act of 1974' was updated on 6th April 2007 to include statements to the effect that any loan agreement must clearly state in its contract certain terms and details of the loan such as the capital value, the interest rate, the number of years to be paid, the monthly installments and similar details and that the agreement must be signed.

Therefore, it is safe to assume that a healthy proportion of loan agreements drawn up before 6th April 2007 would fall foul of the newly amended Consumer Credit Act and as such could be argued as unenforceable. That, in itself, is a correct statement. But any claim would still need to go through a court process and that is where the reality of it all starts to unravel.

There have been cases of people successfully challenging their loan or credit card contracts and going to court and winning. Sometimes, notably if the debt has been passed to a debt collector or debt purchasing company, the debt is written off very easily as the current owner of the debt (the debt purchaser or collector) cannot produce the documentation at all, never mind documentation which is improperly drafted! So you can write off credit card debt much more easily if the debt has been sold on.

However, that is an exception rather than the rule. There is only limited evidence of success across the board. An estimated 100,000 claims are currently going through the courts where consumers are trying to get their credit agreement declared unenforceable by exploiting loopholes in Consumer Creditlegislation. Often, claims are brought because lenders have made mistakes in original documentation or cannot produce copies of agreements. How many of those will succeed? We don't know at the moment because they are still being taken on a case-by-case basis. What is worrying though is that there is still very little evidence in circulation of a high success rate.

So what should that tell us? Simply put, don't invest any money in the process or expose yourself to any future court costs. If you wish to pursue a claim then use an independant claim firm but only use a firm that will operate for you on a 'no-win, no-fee' basis. That way, nothing ventured, nothing gained.