Here’s a fun way to think about a tricky topic. You know the scene in Lewis Caroll’s Alice in Wonderland when the white rabbit hops off saying “I’m late! I’m late! For a very important date!”? Imagine the rabbit is a debt collector. The important date? It’s his last chance to legally make you pay money you owe. Why he’s late? The debt collector has run out of time to sue you for an old and unpaid, or time-barred, debt. For more, follow me down the rabbit hole…
What is a time-barred debt?
It’s a debt that’s too old for a debt collector to sue you to make you pay. Debt collectors have a limited number of years – called the statute of limitations – to sue you to collect on money you owe. Statutes of limitations vary by state, and by type of debt.
What can I do if a debt collector calls about an old debt?
Debt collectors can contact you about time-barred debts at any time. If you get a call from a debt collector, they might come right out and say they can’t take you to court to make you pay a time-barred debt. If a debt collector doesn’t tell you this, ask for the date when you made your most recent payment. Then, ask for a validation notice – a legally required letter detailing the amount owed, and the creditor name. Once you receive the notice, send a letter back within 30 days explaining that you are ‘disputing’ the debt and that you want to ‘verify’ it. Debt collectors must stop trying to collect until they give you verification.
What if I’m sued for an old debt?
Don’t ignore it. Defend your debt collection rights. Consider talking to an attorney in order to prove that the debt is time-barred, and have the lawsuit dismissed. To do this, you may be asked to provide a copy of the verification from the collector, or any information you have that shows the date of your last payment.
Do I have to pay a time-barred debt?
It’s up to you. Here’s what can happen:
Pay nothing. Not paying a debt may lower your credit rating. So check your free credit report first to see if a time-barred debt has been reported. If the debt appears on your credit report, this could make it harder and more expensive for you to get credit, insurance, or loans. Debts stay on your credit report for seven years after you stop paying. Although debt collectors can no longer sue you for a time-barred debt, it won’t make it go away. Debt collectors can keep contacting you to pay because you still owe the money. If you want them to stop, send a cease communications letter.
Partially pay. If you make, or promise to make, a debt payment, the statutes of limitations clock may reset and your debt will no longer be considered time-barred. A debt collector can then sue you for the full debt amount, plus interest and fees.
Pay it off. Before making a full payment, get a signed letter from the debt collector saying that your entire debt is being settled to release you from further obligations.
Debt or debt collection issues on your mind? Talk to us! Write your questions in the comments section below, and we will pick a few to answer. To report a scam, visit ftc.gov/complaint.
by Cristina Miranda
Consumer Education Specialist, FTC
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