By Carol Kando-Pineda
Federal Trade Commission
There’s no doubt about it: you are responsible for your debts. If you fall behind in paying your creditors – or if you dispute the legitimacy of a debt – a debt collector may contact you.
But at a certain point, some debt is too old to be sued on – state laws limit collectors’ ability to collect through legal action after some period of time has passed. Most consumers don’t know their legal rights about these old debts. So when a collector tells a consumer that she owes money and demands payment, it may create the misleading impression that the collector can sue the consumer in court to collect that debt.
In most states, having time-barred debt doesn’t mean that your debt has been forgiven, that you don’t owe it, or that a debt collector can’t try to get you to pay. It simply means that you can’t be sued to collect on the debt. (That doesn’t mean that all debt collectors play by the rules, but I’ll get to that later.)
Time-barred debt can be part of your credit history. Debt can stay on your credit report for seven years from the date of the last activity. In many states, if you make a partial payment on the debt, the clock resets.
A debt collector might come right out and tell you that the debt is time-barred and that you can’t be sued if you don’t pay. But then again, he might not. That’s why it’s important for you to understand your rights and know how to respond to debt collectors who are trying to collect on old debt.
If a collector doesn’t tell you that a particular debt is time-barred – but you think that it might be – ask the collector if the debt is beyond the statute of limitations. The collector doesn’t have to answer, but if he does, the law requires the collector to tell the truth.
If the collector declines to answer, and he’s allowed to, ask another question: What do his records show as the date of your last payment. This is important because it helps determine when the statute of limitations clock starts ticking. If the collector doesn’t give you this information, send him a letter within 30 days of receiving a written notice of the debt. Tell him that you are ‘disputing’ the debt and that you want to ‘verify’ it. The more information you give the collector about why you are disputing the debt, the better. The collector must stop trying to collect until he gives you verification.
Getting back to not all debt collectors playing by the rules… Even though it’s against the law, some debt collectors may go ahead and sue you on a time-barred debt anyway. If that happens, pay attention and respond. Consider talking to an attorney. You or your attorney should tell the judge that the debt is time-barred and, as proof, provide a copy of the verification from the collector or any information you have that shows the date of your last payment. The lawsuit will be dismissed if the judge decides the debt is time-barred. In any case, don’t ignore the lawsuit. If you do, the collector likely will get a court judgment against you, and possibly take money from your paycheck, bank account, or tax refund.
To learn more, read Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts.