Hearing from a debt collector can understandably make you feel very uneasy. That’s especially true if it’s about an old debt. Maybe you thought the debt was long forgotten or it had already been paid. Maybe you’re not even sure the debt is yours. But even if it is is, there’s a chance it’s time-barred.
Before you give up or give in, do some research. Mistakes are common with debt collection. If the debt belongs to you, it could be that the debt collector is calling about a debt that is past your state’s statute of limitations. Those statutes spell out the length of time that creditors or debt collectors have to file a lawsuit against you to pay a debt. Debts that are past the statutes of limitations are called time-barred.
When a debt becomes time-barred it doesn’t mean you don’t owe the debt anymore or that debt collectors have to stop asking you to pay your debt. What it means is that you have the option of challenging the debt. It also gives you a defense in court if you are sued for the debt.
What is time-barred debt?
Each state has its own debt statutes of limitations that vary by the kind of debt and the type of contract involved. For example, oral or unwritten agreements usually have shorter statutes than written ones. Statutes can differ greatly from state to state, and not all states treat the same type of debt the same way. For example, in some states, credit debt, mortgages and medical debt might all have the same length statute of limitations, while in other states, all three could be different.
Most states have statutes that fall within a three to six year range, but some can be as long as 10 years. Once a debt becomes time-barred, creditors or debt collectors can no longer force you to pay your debt in court. However, they can still call you or send you letters to try and get you to pay. The debt also will stay on your credit report for at least seven years. And as long as it’s on your report, it will hurt your credit score.
What should you do if a debt collector calls?
Even if your debt is past the statute of limitations, debt collectors can still contact you to pay it. Some collectors even specialize in this aptly named “zombie debt.” These collectors might try and get you to make a payment on the debt, even a very small one. That’s because in many states, if you make a payment on a time-barred debt, that restarts the clock on the statute of limitations, essentially bringing that debt back to life. It also legally reopens you to being sued for the debt again since it’s no longer time-barred.
That’s why it’s so important not to pay anything toward an old debt, or even agree that the debt is yours, until you know if it’s time-barred or not. If you get a call about an old debt, ask the debt collector if the debt is time-barred. They aren’t allowed to lie to you, but they can refuse to answer the question.
“You can look at copies of your credit reports that typically show when you stopped paying on an account, but because those can have errors, you will want to check any of your own payment and bank records that will show when your pattern of payments ended,” said Michael Bovee, a debt relief expert with more than 20 years of experience, and the co-founder of Resolve.
The Federal Trade Commission recommends asking debt collectors to tell you what their records show as the last time you made a payment. The age of the debt is based on the last time you made a payment on the debt. Even better is if you have your own records to fall back on.
As part of the Fair Debt Collection Practices Act, debt collectors are also required to send you a debt validation letter within five days of contacting you about a debt. Among other information, the letter should include the amount of the debt and the name of the creditor to whom the debt is owed. If you don’t have a letter, ask them to send you one.
If your debt isn’t time-barred, you’ll have to decide if you want to pay it or not. You may be able to negotiate with the debt collector to settle your debt for less than what you owe. Always get an agreement in writing before you pay anything. Paying off or settling a debt won’t necessarily give your credit score a major boost, but it might make it easier to get new credit or a loan.
If you don’t plan on paying the debt, you can send a letter to the debt collector saying that you are disputing the debt. If you send it within 30 days of being contacted by the debt collector, they must pause their collection efforts while they’re investigating your claim.
Even if the debt isn’t time-barred, you can also send a cease-and-desist letter to debt collectors to get them to stop contacting you. The Consumer Financial Protection Bureau has templates you can use.
What should you do if you’re sued for a time-barred debt?
Just because your debt is time-barred, doesn’t mean you can’t be sued. Whether intentionally or not, a debt collector may end up suing you for a debt that is past the statute of limitations.
If you get a lawsuit notice, don’t ignore it. If you don’t show up in court, you lose. Not responding means the debt collector could win a judgment against you in court (even if the debt is legitimately time-barred). A judgement could potentially lead to having your wages garnished or money taken from your bank account or tax return, according to the FTC.
You may want to talk to a lawyer in this situation. Then you’ll have to defend against the lawsuit by proving to the court that the debt is time-barred. That might mean giving them a copy of the debt validation letter from the debt collector or your own records that show the last time you made a payment on the debt.
Again, don’t agree to make any payments on the debt unless you plan on paying off or settling your debt and you have an agreement in writing.
Types of debt that can be time-barred
The point when a debt becomes time-barred depends on the kind of debt, your state’s laws and the contract associated with the debt. The debt statute of limitations for oral contracts (verbal only) and credit cards (which many states consider open-ended accounts) are often the same length of time. The limitations for medical debt (written contracts) and promissory notes (mortgages) also tend to be the same. But there are many exceptions in each state.
Here are the common kinds of debt contracts:
Oral contracts: These are debts that come about from a verbal agreement. Sometimes they are referred to as “unwritten.”
Written contracts: Many debts have a written contract. These contracts must include the terms and conditions of the loan. Medical debts are a common type of written contract.
Promissory notes: These are essentially written promises to pay a debt. Typically, these notes include how and when the loan will be paid off and at what interest rate. Mortgages and student loans are common types of promissory note debts. The main difference between a written contract and a promissory note is that the promissory note spells out the scheduled payments and interest rate.
Open-ended accounts: These are debts with revolving balances (meaning you can pay the debt back or down and borrow the money again) like credit cards and lines of credit. Some states treat credit card debt as written debts, many more consider them open-ended accounts.
Installment sales contracts: In many states, installment sales (the sale of goods between two parties) are based on the Universal Commercial Code (UCC). The UCC is a set of standardized rules used to help make buying and selling goods between states easier. Usually, these sales carry a four-year debt statute of limitations. A common type of consumer installment sales contract is buying a car using the dealership’s financing, rather than, say, paying cash or getting a loan from a bank. In that case, you are paying the dealer directly and they hold the title on the car until you pay your debt.
State by state debt statutes of limitations
In many states, credit card debt is considered an open contract and often has the same statute of limitations as oral/unwritten debt. But not always. Meanwhile, written contracts (medical debt, etc.) and promissory notes (mortgages, private student loans) often have the same statute of limitations. But again, that can vary.
Credit card debt is particularly tricky because some states consider these debts as open-ended contracts and some allow them to be considered written contracts. And sometimes a court decision forces a law change. For example, in 2009, an Illinois appeals court decided credit card agreements could no longer be considered written contracts, moving them from a 10-year statute of limitations to a five-year statute.
Meanwhile, while private student loans have a debt statute of limits, government student loans don’t. So there is no limit to the time when you can be sued for you federal student loan debt.
Because a state’s laws don’t always clearly spell out which type of debt falls into which category, you might want to talk to a lawyer or consult your local Attorney General’s Office (click on your state name below for a direct link) first to ensure your debt is time-barred. You should also consider talking to a consumer advocacy attorney or, if you qualify for free legal help, to a legal aid lawyer.
Here are the debt statute of limitations in all 50 states:
Knowing if your debt is time-barred or not can help you decide what to do if a debt collector contacts you about an old debt. It doesn’t mean the debt is no longer yours, or that it will stop hurting your credit score, but it helps you understand what to do next and what kind of defense you have in case you’re sued.
How Resolve can help
If you’re seeking debt relief, Resolve is here to help. We can assess your situation and show you your options for paying off your debt, including negotiating with your creditors, if appropriate. Our Resolve platform and debt guidance are free. You can review and compare debt relief paths and ask our experts questions without cost. If you then choose to work with one of the service providers in the Resolve Network, we’ll inform you of the fee for their service.