Debt relief orders and written off debts

In cases where debtors have requested that a debt is written off, example sentences that creditors have used in their standard response letters include:

• ‘...consider their customer still liable for the account but they have decided in the circumstances not to take any further action to recover’

• ‘...account is closed. We have reviewed this matter and decided to take no further action to recover the balance’

Some letters confirm that there is ‘no obligation for you to make any further payments.’

The use of this wording is likely to mean the debt is no longer due immediately or at some certain future time. This means it is not a qualifying debt.[1]

Where a debtor has been told that they will not be pursued for a debt, and then relies on that fact and applies for a DRO without listing it as a debt, they might be able to rely on the defence of promissory estoppel if a claim is made against them by a creditor in the future.

Promissory estoppel arises where one party to a contract states that they will not enforce their contractual rights. A clear representation that one party will not enforce part of the contract can constitute a promise that the other party to the contract is entitled to rely on under the law of equity.

If the other party has then relied on that promise and changed their position as a result, the doctrine of promissory estoppel can be raised as a defence. The court might not make an order for payment if it thinks it is inequitable for the party who made the promise to go back on their word and enforce their contractual rights.