If a creditor wants to sue, they must do so within the time periods allowed by law. This time period varies from state to state. However, even if this time period has run, a consumer may “reactivate” the debt by taking certain actions. (Such as promising to pay, corresponding about it, making a small payment, or sometimes even discussing it with a creditor.)
Beware of speaking to creditors about old debts that have expired. The creditor has a certain amount of time to legally sue you, which is called the “Statute of Limitations”. When the time limit passes and the original creditor is no longer allowed to file suit, that creditor will often sell the debt to a third party. The purchaser of the debt may then contact debtors and attempt to collect.
If you know that the statute of limitations on a debt has expired, you shouldn’t speak to or correspond with the creditor. (Unless you have the desire and ability to pay the debt and are ready to do so.) If you choose to do so, you should be aware that you may be “reactivating” the debt and may open yourself up for a lawsuit.Debt collectors that are attempting to collect debts beyond the statute of limitations have been known to get aggressive, and to misrepresent the facts. If you receive a call from a creditor involving an “old debt” you should be aware of the following:
- The creditor may tell you that you will be sued, but may have no legal right to do so.
- Paying a very old debt may not help your credit report score. The debt may be so old that it no longer appears on your credit report.
- The “new” owner of this account may not have documentation about the original debt and may not be able to tell you the original amount of the debt, the creditor, or the date incurred. The amount may not be accurate. In fact, the debt may not even be yours.
- Even if you get a letter from a “law firm” be sure to do your research online to see if there are complaints or allegations against the company or firm for fraudulent activity. Unscrupulous individuals have made a lot of money by misrepresenting themselves and presenting false information in order to receive payment.
- A common scam: an individual or company contacts numerous people alleging a small, expired debt and collects many small payments from thousands of unsuspecting people. In addition, bank account information and credit card information is exposed, and may be used for identity theft purposes. Don’t be a victim!
- This bears repeating: Don’t make a payment, or a promise to pay, or discuss an old debt, unless you don’t mind reactivating it.
- Whenever you dispute an amount owed, keep documentation of that dispute in files that you can access later. Unlike tax returns, this information should be kept indefinitely. Third party purchasers of debt have been known to contact alleged debtors 20 and 25 years later.
- If you do owe debts that are unpaid, you should keep this information in a file as well. You can use this information in your own plan to reduce and control debt, and also you will not be vulnerable to untrue allegations of amounts owed.
- If you are being harassed by creditors, or need legal assistance in debt management, asset protection or to discuss bankruptcy options, contact an attorney for a consultation appointment so that you can understand all of your legal options.