You have an old debt that's beyond the statute of limitations and long ago dropped off your credit history. Then one day you get a call from a debt collector insisting you pay it. Can they do that?
You probably know that if you owe money, the company you owe can do lots of things to try to collect it — like damaging your credit score, sending a collection agency after you, and suing you in court. But can they come after you for the rest of your life?
Nothing lasts forever. Nearly all transgressions in our society have a limit beyond which those doing the pursuing have to give it up. It’s called the “statute of limitations.” While there are a few crimes that don’t have one — murder, for example — debt does. Here’s today’s reader question:
I have an old catalog debt that was placed into collections. This debt has finally been removed from my credit reports for a few years now from all three credit bureaus. Yet I have recently started getting letters again from a collection agency regarding this debt. To the best of my knowledge, this account is also past the Florida statute of limitations. What should I do about this? Is there a time frame when they can no longer harass you for payment?
If I start paying on it again, will it be placed back onto my credit report? (I don’t want it placed back on my credit report. I’ve worked hard getting my credit back in good standing.) Should I pay it off? Or should I just ignore the situation?
Any advice you can offer would help me a lot. Thank you so much. – Tammy
Here’s the deal, Tammy.
While there’s nothing barring a company from attempting to collect forever, their legal remedies do expire, and those are defined by the laws in your state. To find the statute of limitations on debt, check out this chart from CreditInfoCenter.com, or this one from BCSalliance.com. In Florida, they have four years to collect a bad debt for “open accounts” — the category that includes credit card debt.
But just because they can’t win in court doesn’t mean they can’t sue. Nor does the statute of limitations prevent them from calling you, sending you letters or otherwise trying to get you to pay. In fact, this practice is quite common. Collection agencies and law firms routinely buy old debts for pennies on the dollar and attempt to collect them. And they’re certainly not above saying or doing just about anything to get you back on the hook.
The laws regarding debt collection are tricky. For example, there are states that allow otherwise legally noncollectable debts to be reinstated if the consumer makes a payment — or even acknowledges the debt.
Keep in mind that after the statute of limitations expires, unless the debt has been charged off or discharged in bankruptcy, you still owe the money. In other words, the statute of limitations doesn’t wipe out the debt, it just reduces the legal remedies available to collect it.
So if you find yourself in this situation, the smart move is to call a consumer lawyer (you can find one at the National Association of Consumer Advocates’ website) and ask the attorney what to do.
Do this before responding in any way to any collection notice or other contact from a collection agency. Otherwise, you might inadvertently make yourself liable for an old debt.
Your credit report
What shows up on your credit report is determined not by state but federal law. The credit reporting agencies (Experian, TransUnion and Equifax) have to remove most negative information after seven years. Bankruptcies can remain on your report for up to 10 years, and there are some other, less common debts, like unpaid taxes and child support, that can remain on your report indefinitely.
The seven-year period normally begins 180 days after the debt becomes delinquent — the day you first missed a payment. But if you start once again making payments, the debt could reappear.
Here’s what to do
There are plenty of places to learn more (this article from Liz Weston, for example). But no matter how much you read and think you understand, I’d still advise at least talking to, if not hiring, a lawyer. The more money at stake, the more important this becomes.
You should also know there are scenarios when you might get an attorney without paying for one. See “Abused by a Debt Collector? Get a Free Lawyer.”
While I’m all for do-it-yourself solutions for everything from remodeling to making a will, this area is too much of a minefield to go it alone. It’s a complex topic, and reading simple stuff online probably won’t answer all of your questions or completely put you at ease. However, talking to someone who does this for a living will.
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