What You Should Know About Time-Barred Debts

Debts With Expired Statute of Limitations

Woman sitting on sofa looking over bills

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Time-barred debts are debts that are too old for creditors and debt collectors to sue you for collection. Once debts are a certain age, the risk of being sued drops dramatically, because debts can become time-barred after a certain period, depending on the law in your state.

A business will call these old debts accounts uncollectible. These are debts that they feel have very little chance of them ever collecting. Often, the original lender will sell this debt to a debt collection agency.

What Are Time-Barred Debts?

Each state has a law that dictates how long a debt collector can sue you for a bad debt. This timeframe is known as the statute of limitation, but can also be called a procedural rule or a statute of repose. The statute of limitations and is between three and six years for most states but can be longer. As an example, many states have a 10-year window for credit card debt. Before you respond to an old debt, check the statute of limitations in your state. You can confirm the statute with your State Attorney General.

Lawsuits for Time-Barred Debt

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from bringing a suit or even threatening to sue you for a time-barred debt. But that doesn't mean it won't happen. In February 2012, the Federal Trade Commission (FTC) sued one large debt collector, Asset Acceptance, for violating this part of the FDCPA. As part of the settlement, Asset Acceptance now has included a "will not sue" notice in collection notices for debts that are past the statute of limitations.

If you happen to be sued for a time-barred debt, you can prove to the court that the statute of limitations has expired. Don't ignore a lawsuit summons under the assumption that it will take care of itself or that it doesn't matter because the statute of limitations has expired. You can also file a complaint against the company with the FTC and your State's Attorney General office.

The creditor or collector could obtain a default judgment against you and an order to garnish your wages—automatically deducted from your paycheck—if you don't pay the judgment. Consult with an attorney to determine the best course of action to take if you're sued for a debt, whether the debt is time-barred or not.

Collection Activity Is Still Allowed

Don't assume that because the debt is time-barred you don't still owe ​it or that your creditor can't still come after you for the debt. Creditors and debt collectors can still collect time-barred debts with calls and letters, within the bounds of the law, of course.

Collectors can continue to contact you about payment. However, they must tell you that the debt is beyond the statues of limitation if you ask. Ask what the collector's records show as the date of the debt and the date of your last payment. The date of the last payment is when the clock starts ticking for the time limitation.

The collector must provide this information. If they can't or won't give this to you, send a written letter—within 30 days—to let them know you want to verify the information and perhaps dispute the claim. Also, until they provide this verification, they must stop contacting you to pay the debt.

Time-barred debts might even appear on your credit report if the credit reporting time limit hasn't expired. Most debts can appear on your credit report for seven years from the date it became delinquent. If the statute of limitations expires on debt before that seven-year timeframe is up, the account will remain on your credit report.

What You Can Do

There are a few ways to handle a debt collector who's attempting to collect a time-barred debt from you. First, request the debt collector provide you with written verification of the debt. This process is known as debt validation and should be done within 30 days of the collector's initial contact with you. After you send a written request for verification, collectors can't attempt to collect from you until they've provided proof that you owe the debt.

Send a written letter to the debt collector asking them to stop contacting you. If you don't want a debt collector to call or send letters anymore, you must send a written letter stating the statute of limitations has expired, and you no longer wish to be contacted about the debt. The collector can contact you once more to let you know what it intends to do next, if anything, and after that, you should never hear from that collector again.

It Is Still a Debt

Ignoring the debt doesn't make it go away, but you might choose this option if you don't want to bother with spending letters. Remember, the debt doesn't go away just because you ignore it and make sure you don't ignore a lawsuit summons.

You can ignore the debt, and it will remain on your credit history, and collectors may continue to try to collect the money due. You can also make full or partial payment of what is owed. However, if you make a partial payment, it may restart the limitations time clock again.

Also, once you send some of the money, it opens the door for the collector to take you to court on the debt. They can also add additional interest and fees to the total amount they are bringing against you in the suit.

Keep in mind that as long as the debt exists, it can be sold and assigned to various collection agencies. You will have to repeat these steps each time a new debt collector starts collecting on your debt. If a debt collector violates your rights, you can file a complaint with the ​Federal Trade Commission and your State Attorney General. You may also be able to sue the debt collector for up to $1,000 plus damages.​

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