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By law, debt collectors cannot sue you to repay a time-barred debt.
If you have old debt, there’s good news and there’s bad news. Bad news first: you still owe the money.
Now for the good news: you may be safe from a lawsuit to repay the debt. After a period of time, called the statute of limitations, your debt is considered time-barred, and under the Fair Debt Collection Practices Act (FDCPA), you cannot be subjected to any legal action to repay that debt.
Know your rights under the FDCPA by following these steps:
- Determine whether or not your debt is time-barred.This can be complicated and will require some research:
- Understand your state’s statute of limitations. Unfortunately, the time period a creditor has to legally collect your loan varies from state to state. Contact your state Attorney General’s office or an attorney to better understand your state’s statute of limitations.
- Determine the type of debt. The type of debt also affects the statute of limitations—or whether there is one at all. For example, if you owe a federal student loan, there is no time period associated with repayment. If you have old credit card debt, your statute of limitations can range from three to 10 years.
- Know the date of your last payment. This date is typically used to calculate your debt’s age and whether it meets the statute of limitations. Gather whatever evidence you have to prove your last date of payment.
- Be aware of how you respond to debt collectors.Collectors are allowed to contact you about your debt. What you do and say could have major implications on your debt status.
- Do not acknowledge the debt. If you do imply or state that you owe the debt—either verbally or in writing—your debt goes back to day one and you are no longer protected by the statute of limitations.
- Do not make a partial payment. This will also set the clock back and eliminate your protection under the FDCPA.
- Do not agree to extend your time to pay. Called “tolling,” this extends the statute of limitations, and essentially acknowledges that you owe the debt.
- Know your rights.
- Ask for verification. If you are contacted by a debt collector and you think the debt might be time-barred, ask. If the collector answers, he or she is required to answer truthfully. If the collector declines to answer, ask for a verification letter that provides their date of record of your last payment—and keep that letter.
- If you get sued, contact an attorney. Don’t ignore the lawsuit, even if you feel your debt is time-barred. Provide the court with your verification letter and any other supporting documents that show your last date of payment.
- Make a plan for dealing with the debt.
- Contact the collection agency. If you decide to pay your debt, you may be able to work out a settlement for a sum less than your original debt. If you do, be sure to get it in writing before you make your first payment. You can also choose to pay the debt in full.
- Choose not to pay. While you’re not legally obligated to repay a time-barred debt, it doesn’t simply go away. If you choose not to repay, you could end up hurting your credit score, which can make it more difficult, and expensive, to secure a loan or obtain insurance.
There is no easy way to get out of debt, but there are ways to better manage your money and find debt relief. Here are six steps to help you reduce your debt.
This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.
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