Getting calls from debt collectors can be frustrating and even confusing. That’s even truer when someone is contacting you about an old debt you forgot about, thought was long resolved, or didn’t know about in the first place. But how long can someone chase you for money you might owe? Can a debt collector collect after 10 years, for example? Find out in the informational guide below.
Can a Debt Collector Collect After 10 Years?
In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can’t typically take legal action against you. If you notify them that the debt is past the statute of limitations and request they not contact you again, they likely won’t.
It also depends on when you made the last payment. The statute of limitations for most debts starts when you go into default. If a debt is 10 years old but you were making payments until 3 years ago, the debt is likely still within the statute of limitations and can be pursued by a debt collector.
However, it’s important to note that every case is unique and the statute of limitations on various forms of debt is different in each state. Understanding what the rules in your state are and how they might apply to your specific debt situation is important. Contact a lawyer for your unique situation if you have questions.
How Long Can a Debt Collector Pursue an Old Debt?
Each state has a law referred to as a statute of limitations that spells out the time period during which a creditor or collector may sue borrowers to collect debts. In most states, they run between four and six years after the last payment was made on the debt. This means that even a debt that is older than that may still be able to be collected on if you’ve made a payment sometime in the last four to six years.
In some states, a collection agency cannot try to collect at all once a debt is past the statute of limitations. In other states, they cannot sue you, but they may still try to collect the debt, which can include calls and written requests.
Some debt buyers—companies that buy and try to collect very old debts—still go after borrowers and might even take them to court. If they do this knowing that the debt is past the statute of limitations, they may have violated the Fair Debt Collections Practices Act. But they also know that most borrowers who are sued for old debts won’t show up in court, and the judge will issue a default judgment.
If your debt is past the statute of limitations at this point, you can re-open the default judgment and ask the judge to vacate it because it is time-barred. The process is relatively straightforward, but you may want to consult with an attorney to ensure it’s done correctly.
Always respond to legal summons. Judgments may give collectors additional collection powers, such as access to the money a debtor has in their bank account or the ability to garnish wages to collect the judgment. To prevent this, all a borrower has to do is appear in court at the appointed time and explain that they have a time-barred debt. If that is correct, the lawsuit will be dismissed.
It’s important to note that the statute of limitations is not the same as how long the debt appears on your credit report. The timeline for debt to stay on your credit report is 7.5 years, but again, this depends on your activity with the debt. If the debt was sold by the original lender at 6 years, and you made a payment with the new debt buyer, it could restart the clock.
What Is a Time-Barred Debt?
Time-barred debt refers to debt that’s beyond the statute of limitations. It simply means that the debt is not legally enforceable. It doesn’t mean you don’t owe the debt if it was legitimate to begin with. It means the creditor or collector can’t use the legal system to force you to make good on the debt.
According to the Federal Trade Commission, whether or not collectors can continue to contact you about a time-barred debt is up to various state laws. Some states do make this illegal. And in any state, a debt collector can’t sue you, threaten to sue you, or harass you over time-barred debt.
If you’re being contacted by a creditor about a time-barred debt, you can ask them to stop. The FTC recommends sending this request in writing by mail.
When Does the Clock Start on the Statute of Limitations for Debt?
Many people make the mistake of believing that the statute of limitations on debt starts when they open an account. In reality, the countdown starts when you miss a payment or make your last payment.
For example, imagine you have a credit card you opened in 2000. You used the account and paid as agreed for five years. In 2005, something happened that changed your income and ability to make payments. You stopped paying on the credit card debt in July 2005.
Depending on which state you’re in, the statute of limitations could be from 3 to 10 years. Let’s say the state in question had a 6-year statute of limitations. The debt would be collectible using the legal system until August 2011.
You can also inadvertently reset the clock on a statute of limitations by making an agreement to pay or paying a partial amount on a debt. In most cases, that resets the clock starting at that date.
Consider the same situation above. The credit card company turns your account over to collections, and in 2010, you start getting notices about your debt. You pay $400 toward the debt in September 2010. The 6-year clock resets, which means the collection agency has until October 2016 to file a lawsuit against you to collect the rest of the debt.
Do Time-Barred Debts Show Up on Your Credit Report?
Time-barred debts can show up on a credit report. Negative items such as missed payments and collections accounts stay on your credit report around 7 years. Many state statutes of limitations on debt are less than 7 years.
Can a Collection Agency Report an Old Debt as New?
A collection agency can list an old debt as a new trade line on your credit report. It works like this:
- You have a loan, credit card, or other debt. It’s listed as a tradeline by your creditor on your credit report.
- You default on that debt. The creditor closes your account. It’s now listed on your credit report as a closed account with negative payment information.
- The original creditor eventually sells the account to a collections agency.
- The collections agency now owns the account and can list it as a collections account—a separate tradeline—on your credit report.
What to Do If You Are Contacted About an Old Debt
If you’re contacted about an old debt, it doesn’t mean you should automatically pay it. Remember, agreeing to terms and providing a payment can restart the clock on an old debt, and it’s important to be aware of your rights as a consumer. Instead, take the steps below to see if you need to pay the debt and what your options are.
1. Ask the creditor to send you written notice of the debt.
This is required under the federal Fair Debt Collections Practices Act even if you don’t ask, but asking is a good first step. Scammers will say they aren’t allowed to send a notice or will try to email instead, which helps you weed out illegitimate callers. By keeping the initial phone conversation to a minimum, you may avoid saying or doing something that could hurt you later on with legitimate collectors.
2. Validate the debt.
Once you receive written notice of the debt, you have 30 days to request validation of the debt. Mail your request to the creditor or collections agency via a certified letter and ask them to validate the debt. You don’t have to give a reason for your request. You can simply say, “I dispute this debt. Please validate it.”
3. Confirm that the debt is within the statute of limitations.
While you’re waiting for the response from the bill collector, contact a consumer law attorney or your state attorney general’s office to confirm the statute of limitations for the debt. Consumer law attorneys who regularly represent consumers in cases against debt collectors often provide a free consultation.
4. Decide on an action.
Once you receive validation of the debt and confirm whether it’s inside or outside the statute of limitations, you typically have three main options.
- Pay it. If you know you owe the debt and you can pay it, you can do so. Make sure you keep written records of the amount due and your payment. Sometimes these old debts get sold to more than one collection agency, and if you get another call about this debt, you want to have proof you’ve paid it.
- Settle it. If you know you owe the debt and want to try to make good on it, but you can’t pay the full amount—or if the debt has been inflated by fees— you may want to negotiate to settle it for less than the full amount due. This is tricky, though, because once you start negotiating, you could reset the statute of limitations and end up being sued for the entire debt. That could lead to wage garnishments or other issues. If you want to go this route, your best bet is to talk with an attorney first.
- Send the collector a letter telling them to leave you alone. You have the right to ask a debt collector to stop contacting you. Once you do that, they are only allowed to contact you to tell you if they are taking legal action against you. If you know the debt is outside the statute of limitations, state that in your letter and tell them not to contact you again.
COVID-19 and Debt Collections
While many financial changes were temporarily put into place due to the COVID-19 pandemic, the time during which collectors could work to collect a debt wasn’t changed. Some laws, however, did protect certain funds—such as stimulus funds—from being taken by collectors to satisfy outstanding debts.
One of the best ways to protect yourself against old debts cropping up and creating problems is to keep an eye on your credit report. Sign up for ExtraCredit for a proactive look at your credit reports and scores so you can take care of issues before they become legal problems.
This article is originally on Credit.com