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Debt Advice Handbook Scotland 1st ed - with new material

Checking liability

• Debts after death
• Debt lapsed because of time
• Faulty goods
• Minors
• Incapacity
• Undue influence/duress
• Fuel/beneficial user

There are many reasons why a client may not be liable for a debt. If the client is not liable, they should be able to challenge the creditor.

Some specific areas where an adviser should check for liability.

Debts after death

A client is not generally responsible for the debts of someone who died, whatever their relationship. They may be liable if the client had joint and several liability with the person who died and they both signed the agreement. This could include a mortgage, council tax or rent arrears.

Someone dealing with the estate of a person who has died has no personal liability for any debts that cannot be paid from the estate.

Creditors can make a claim against the estate of the person who died. This includes their money, personal possessions and property. See Chapter 19 for more information about what to do after a death.

Debt lapsed because of time

If there has been no acknowledgement or payment between the client and creditor for five years or more, and no court action has been taken by the creditor, the client may no longer be liable for the debt. If court action has taken place and resulted in a decree, this timeframe is extended to 20 years. For council tax debt, the period is also 20 years. This is a complex area of the law and advisers should read the Chapter 12 for more detail.

Faulty goods

If goods or services provided to the client are faulty, the debt may be challenged. This especially applies to goods bought on credit through a third-party finance company or credit card. For goods or services to be faulty they would need to be:

•broken or damaged;
•unusable or not fit for purpose;
•not what was advertised.

Minors

If the client is under 16, they can only be responsible for a debt if it was for ‘necessaries’. This is defined as ‘goods suitable to the condition in life of a minor and their requirements at the time of sale and delivery’. For example, a mobile phone contract, clothes or food.

Incapacity

For an agreement to be valid, the client must have been aware of what they were doing when they made the agreement. The client must also understand what they were doing and remember making the agreement. If the client has a mental health condition which leads to limited mental capacity or has drug or alcohol problems the debt may be challenged.

Undue influence/duress

If the client signed an agreement under coercion or without understanding the implications of an agreement, then the debt may be challenged due to undue influence or duress.

Examples of this include actual undue influence, such as if the client was subject to domestic or financial abuse, or presumed undue influence, such as if someone the client relies on for advice influenced them into signing the agreement through misrepresentation.

Fuel/beneficial user

Fuel companies can only seek to recover charges for energy consumed in the previous 12 months, unless the bill was sent before May 2018. If the client was not named on the fuel bill but lives in the property, they can challenge debt the fuel company claims the client owes, as beneficial users may not be liable for a fuel debt.