How Old Debt Can Come Back to Haunt You

Many people, who now live financially responsible lives, have had their past come back to haunt them. After years of paying bills on time, building up their credit scores, and qualifying for mortgages, they might receive a call one day from a collection’s agency informing them of an outstanding debt – from 10 years ago! A typical response from many people, fearful that this might somehow ruin their credit, is to agree to make payments towards the old debt. That could be a big mistake.

Though it may be a moral obligation, old debt may not be a legal obligation after a certain period of time has passed. And old debt may be better left alone as far as your credit score goes. Before agreeing to anything with a collection agency, it’s essential to know the law, your rights, and how to deal with the agency.

When Old Debt is Really Old Debt

First, it’s important to understand that a debt is considered “old” when it is beyond the statute of limitations for legal collections. Depending on the state, it ranges from a few years to as many as 15 years. When a debt is past the statute of limitations, you can no longer be sued for the collection of the debt. If you receive a collections call on an old debt, you can be reasonably certain that it is not the original creditor trying to collect. Most creditors charge off the debt after about a year and then sell it to a collection agency for a discount. But, within the statute of limitations, that agency has every legal right to pursue collections.

How to Deal with an Old Debt Collection

If you receive a call regarding an old debt, here are the critical aspects of the law to remember:

• You can’t be sued in court for collections on an old debt. If they threaten a suit, they are breaking the law.
• In many states, a partial payment made to a collector on an old debt is an acknowledgment of the debt, which renews the statute of limitations and credit reporting.
• You don’t need to acknowledge the debt or agree to payments. It’s best if you don’t communicate with the agency at all.
• According to the law, the agency must provide you with written notification of the debt. If you send a certified letter back within 30 days to dispute the debt, the agency must cease all contacts until they can provide you with verification of the debt.
• If they provide verification, you still are not required to pay the debt. Remember, if you do, it will reactivate the debt on your credit report.

If you have “old” debt that is within the statute of limitations or the seven-year credit reporting timeline, you should take steps to negotiate a payoff with the creditor. If it is a collections agency, they would most likely be willing to agree to a lump-sum settlement of half of the amount or less.