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What You Need to Know About Time Barred Debt the Statute of Limitations and Debt Collection

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The Federal Trade Commission has released new information to help you better understand the issues surrounding Time Barred debt and debt expired under the Statute of Limitations. If you would like to learn more about specific state regulations you can use the free compliance module here.

Understanding Your Rights When It Comes to Old Debts

If you have old debts, collectors may not be able to sue you to collect on them. That’s because debt collectors have a limited number of years — known as the statute of limitations — to sue you to collect. After that, your unpaid debts are considered “time-barred.” According to the law, a debt collector cannot sue you for not paying a debt that’s time-barred.

This gets tricky for consumers because the statute of limitations varies from state to state and for different kinds of debts. It is also tricky because, under certain circumstances, the clock can be reset, and the time period can be started fresh. That’s why the Federal Trade Commission (FTC), the nation’s consumer protection agency, says it’s important to understand your rights if a debt collector contacts you about an old debt.

Under the federal Fair Debt Collection Practices Act (FDCPA), a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy unpaid debts and then try to collect them. The term ‘debt collector’ doesn’t include original creditors who collect their own debts.

When is an old debt too old for a collector to sue?

Typically, state law determines how long the statute of limitations lasts. Usually, the clock starts ticking when you fail to make a payment; when it stops depends on two things: the type of debt and the law that applies either in the state where you live or the state specified in your credit contract. For example, the statute of limitations for credit card debt in a few states may be as long as 10 years, but most states impose a period of three to six years. To determine the statute of limitations on different kinds of debts under each state’s law, check with a legal aid lawyer, another attorney, or your State Attorney General’s Office.

What should I do if a debt collector calls about a time-barred debt?

Collectors are allowed to contact you about time-barred debts. They might tell you that the debt is time-barred and that they can’t sue you if you don’t pay.

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. If the collector answers your question, the law requires that his answer be truthful. Some collectors may decline to answer, however. Another question to ask a collector if you think that a debt might be time-barred is what their 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 a collector doesn’t give you this information, send him a letter within 30 days of receiving a written notice of the debt. Explain 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. Collectors must stop trying to collect until they give you verification. Keep a copy of your letter and the verification you receive.

Must I pay a debt that’s considered time-barred?

The decision to pay a time-barred debt is up to you. You have options, but each one has consequences. For example, whether you pay the debt and how much you pay will affect your credit rating. Consider talking to a lawyer before you choose an option.

What should I do if I’m sued for a time-barred debt?

Defend yourself in court. If you’re sued to collect on a time-barred debt, 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.

Assert your FDCPA rights. It’s against the law for a collector to sue you or threaten to sue you on a time-barred debt. If you think a collector has broken the law, file a complaint with the FTC and your state Attorney General, and consider talking to an attorney about bringing your own private action against the collector for violating the FDCPA. – Source