Prescription of a debt

The Prescription and Limitation (Scotland) Act 1973 is a very complex piece of legislation. However, money advisers should be aware of certain areas which may impact on the advice they give to clients.

Negative Prescription is the part of the Act that concerns money advisers. It deals with the lapse of time on rights and obligations and this may affect a creditor’s right to pursue a debt.

If a debt has existed for a period of five years or more without the creditor taking court action for recovery, then that  debt would prescribe and be extinguished. However, if the debtor had written to the creditor acknowledging that the obligation or debt existed, or had made any payments, the five-year period would restart. This is known as the five-year negative prescriptive period and applies among other things to any obligation to pay  sums of money due by way of interest or instalment.

A creditor could restart the five-year period by making a relevant claim (e.g. a court or arbitration action).

There is also a twenty-year negative prescriptive period.  A decree of court has a twenty-year prescriptive life and council tax debts where a summary warrant has been applied would also come under the twenty-year negative prescriptive period as a summary warrant is equivalent to a decree. The twenty year prescriptive period is also applied if an authority is exercising its jurisdiction under any enactment.