How Long Can Debt Be Collected? | Credit.com (2024)

How Long Can Debt Be Collected? | Credit.com (1)

If you stop making payments on your debts, creditors usually have a set amount of time to pursue repayment. After that time, they can no longer legally pursue the debt. But that doesn’t mean you can just forget about the debt. Learn more about how debt collection and statutes of limitations work.

In This Piece

  • How Does Debt Collection Work?
  • What Are the Four Types of Debt?
  • Can a Debt Collector Collect After 10 Years?
  • What “Restarts” the Clock on Old Debt?
  • How LongCan a Debt Collector Pursue an Old Debt?
  • What Is a Time-Barred Debt?
  • What Effect Does Bankruptcy Have on Old Debt?
  • What to Do If You Are Contacted About an Old Debt
  • Do Time-Barred Debts Show Up on Your Credit Report?
  • Debt Collections and Credit Reports

How Does Debt Collection Work?

If a creditor doesn’t believe it can recover a debt, it may sell that debt to a collection agency. These agencies specialize in debt recovery and have the resources, staff, and time to pursue old debts more aggressively than some original creditors.

A collection agency can also list an old debt as a new line on your credit report with a continuation of the original debt date.

When you default on debt, the creditor may close your account and report it as a closed account with negative payment information. When the account is sold to a collection agency, the collection agency owns the account and can list it as a collections account on your credit report.

As long as the collection agency can document the debt, it has a legal right to pursue it. That includes attempting to sue you for the debt and following up with methods such as wage garnishment if it receives a judgment for the debt.

What Are the Four Types of Debt?

Debt generally falls into a few main types. Each type works fairly similarly when it comes todebt collection.

If you miss payments on a debt, it can become delinquent and go to collections no matter how the original account was set up. Here are the main four types of debt:

  • Secured. Secured debt means you put something up as collateral to borrow against. That makes debt collection simple: the collateral can be repossessed.
  • Unsecured. Unsecured debt doesn’t involve collateral, so collection can get a bit messy. This can include lawsuits and wage garnishment.
  • Revolving. Revolving credit involves an open line of credit you can continue to draw on as you pay it off. Credit cards are a common form of revolving credit. This type of debt is usually unsecured, but secured options are available for people with poor or no credit.
  • Installment. Installment debt is a one-time loan paid back via a series of payments. Examples include auto loans, student loans, and mortgages. Installment debt can also be secured or unsecured.

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. Thestatute of limitations for most debts starts when you go into default. If a debt is 10 years old but you were making payments until three years ago, the debt is likely still within thestatute of limitations and can be pursued bya debt collector.

However, it’s important to note that every case is unique and thestatute of limitationson 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 Debt Be Collected? | Credit.com (2)

What “Restarts” the Clock on Old Debt?

Many people make the mistake of believing 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 2010. You used the account and paid as agreed for five years. In 2015, something happened that changed your income and ability to make payments, and you stopped paying on the credit card debt. Depending on which state you’re in, the statute of limitations could be from three to 10 years. If the state has a six-year statute of limitations, that debt would have been collectible using the legal system until 2021—six years after the last activity on the account. Note that some debts have an even longer statute of limitations in some states, such as promissory notes, revolving credit, or legal oral contracts.

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, the clock resets starting at that date. It’s important to factor this point into any negotiations or repayment plans. If the statute of limitations is almost up, it may not be in your best interest to make any payments. However, if there’s still a lot of time left for creditors or collectors to sue, it may be wise to start making payments.

Having said that, an unpaid debt will stay on your credit report for about seven years, even if the time clock has run out.

How LongCan a Debt Collector Pursue an Old Debt?

In some states, acollection agency cannot try to collect at all once a debt is past thestatute of limitations. In other states, they cannot sue you, but they may still try tocollect the debt, which can include calls and written requests.

Somedebt buyers—companies that buy and try to collect very old debts—still go after borrowers and might even take them tocourt. If they do this knowing that the debt is past the statute of limitations, they may haveviolated the Fair Debt Collections Practices Act. But they also know that most borrowers who are sued for old debts won’t show up incourt, and the judge will issue adefault judgment.

If your debt is past the statute of limitations at this point, you can re-open the default judgment andask the judge to vacate itbecause 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 theirbank account or the abilitytogarnish wagesto collect the judgment. To prevent this, all a borrower has to do is appear incourt at the appointed time and explain that they have atime-barred debt. If that is correct, the lawsuit will be dismissed.

It’s important to note that thestatute of limitations is not the same as how long the debt appears on yourcredit report. The timeline for debt to stay on yourcredit report is often seven years, but again, this depends on your activity with the debt. If the debt was sold by the original lender at six years, and you made apayment 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 theFederal 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 inanystate, 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 youmiss a paymentor 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 three to 10 years. Let’s say the state in question had a six-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.

What Debt Isn’t Subject to the Statute of Limitations?

Time-barred debt refers to debt that’s beyond the statute of limitations. It doesn’t mean you don’t owe the debt if it was legitimate to begin with, but the creditor or collector can’t use the legal system to force you to make good on the debt.

What Effect Does Bankruptcy Have on Old Debt?

Bankruptcy means creditors can’t legally pursue debt collection of any credit debt in the bankruptcy. The debt also can’t be sent to a collection agency, and almost all collection activity, including legal action or wage garnishment, is prohibited. If you’re contacted about paying a debt after filing for bankruptcy, it’s a good idea to turn the matter over to your attorney to handle. Some debts can’t be discharged, such as student loans, taxes, and child support, even when you declare bankruptcy.

Negative payment history and bankruptcy can cause major damage to your credit score. So even if you’re off the hook for a debt, you still have to consider your credit and how you can start to build it back up.

What to Do If You Are Contacted About an Old Debt

If you’recontacted about an old debt, it doesn’t mean you should automaticallypay it. Remember, agreeing to terms and providing apayment can restart the clock on an old debt, and it’s important to be aware of yourrights as a consumer. Instead, take the steps below to see if you need topay the debt and what your options are.

1. Askthecreditor to send you written notice of the debt.

Thisis requiredunder the federalFair Debt Collections Practices Acteven if you don’t ask, but asking is a good first step.Scammerswill 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.”

Tip: If the debt isn’t yours, you may want to reach out to acredit repair organizationto help you work to challenge the debt and request it be removed from your credit report.

3. Confirm that the debt is within thestatute of limitations.

While you’re waiting for the response from the bill collector, contact a consumerlaw attorney or your stateattorney general’s office to confirm thestatute of limitations for the debt. Consumerlaw attorneys who regularly represent consumers in cases againstdebt 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 aska debt collector to stop contacting you. Once you do that, they are only allowed to contact you to tell you if they aretakinglegal action against you. If you know the debt is outside thestatute of limitations, state that in your letter and tell them not to contact you again.

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 accountsstay on your credit report around seven years. Many state statutes of limitations on debt are less than seven 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.

Debt Collections and Credit Reports

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.

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    How Long Can Debt Be Collected? | Credit.com (2024)

    FAQs

    How Long Can Debt Be Collected? | Credit.com? ›

    Virtually all credit card agreements are written contracts. So, you and the credit card company put the terms of the agreement in writing. Often, you agree to the contract terms listed on the credit card application when you sign it. In California, the statute of limitations for a written contract is four years.

    How long can credit debt be collected? ›

    4 years

    Can a credit card company sue you after 10 years? ›

    Virtually all credit card agreements are written contracts. So, you and the credit card company put the terms of the agreement in writing. Often, you agree to the contract terms listed on the credit card application when you sign it. In California, the statute of limitations for a written contract is four years.

    Can a 10 year old debt still be collected? ›

    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.

    How long can a collection legally stay on your credit report? ›

    Like other adverse information, collections will remain on your credit report for 7 years. A paid collection account will remain on your credit report for 7 years as well. There is a state exception for residents of New York for which paid collections fall off their credit reports after 5 years.

    At what point does a debt become uncollectible? ›

    Typically, after 10 years of not paying debt, the statute of limitations will have passed. This means that while you technically still owe the debt, debt collectors may try to collect it, but they typically cannot pursue legal action against you.

    Do unpaid collections go away? ›

    Collections agency debt

    Instead, it'll typically remain there for the standard period of seven years starting from the date it was filed. Under certain conditions, however, the collections agency can remove the report from your credit profile early.

    Can I be chased for a 20 year old debt? ›

    There's no time limit for the creditor to enforce the order. If the court order was made more than 6 years ago, the creditor has to get court permission before they can use bailiffs.

    What is the 11 word phrase to stop debt collectors? ›

    If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

    What are 3 things that a debt collection agency Cannot do? ›

    Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.

    Is it true that after 7 years your credit is clear? ›

    Take a deep breath and understand that accounts in collection won't plague your credit reports forever. They'll generally fall off your reports after seven years, and you may even have options for getting them removed before then.

    Can a debt collector restart the clock on my old debt? ›

    Keep in mind that making a partial payment or acknowledging you owe an old debt, even after the statute of limitations expired, may restart the time period. It may also be affected by terms in the contract with the creditor or if you moved to a state where the laws differ.

    Can a 10 year old debt be put on your credit report? ›

    The debt will likely fall off of your credit report after seven years. In some states, the statute of limitations could last longer, so make a note of the start date as soon as you can.

    Can debt collectors chase you after 5 years? ›

    If a creditor hasn't contacted you about a credit debt within the 6 year time limit they can't force you to pay it back. They also can't force you to pay if there were problems with the original agreement, for example if they didn't include the right information about how the money would be paid back.

    Can a debt be collected after 22 years? ›

    In California, the statute of limitations for consumer debt is four years. This means a creditor can't prevail in court after four years have passed, making the debt essentially uncollectable.

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