While new debt can seem more immediate and urgent, older debts don’t necessarily go away. Time-barred debt is the term used to identify a debt that has expired under the statute of limitations. This means that the creditor can no longer sue the debtor to collect.
That’s the gist of it, but the details vary from state to state. Typically the clock starts on a debt the first time you miss a payment and runs from there. However, that can be different depending on where you live and what actions you’ve taken with your creditor.
It’s worth noting that in this post, when we refer to a debt collector, we are talking about collectors or collection agencies, lawyers who are paid to collect debt or anyone else who purchases the debt with the intent of collecting. Original creditors, the people and companies through which you initially acquired your debt, are not included in this term for our purposes.
While the best way to learn about time-barred debt is to speak to a lawyer in your state, there are a few general pieces of knowledge that can be helpful in dealing with debt collectors.
Suspect a debt is time-barred? Ask!
If you are contacted by a collector for a debt you suspect is past the statue of limitations, simply ask. They may decline to answer, but they cannot lie to you.
Also, it may help to ask for written verification of your last payment. That way, if you do decide to dispute the debt, you have all the evidence you need to show that it may be time-barred.
As always, documentation is power. Make sure you get everything in writing, always.
Do I have to pay a time-barred debt?
You’re still on the hook, and making partial payments or no payment can seriously affect your credit rating. The main point of time-barred debt and the statute of limitations is that a collector cannot sue you to collect. It doesn’t mean that you don’t have to pay.
Ideally you’ll pay off the entire amount of the debt, but you can also make partial payments. This starts the clock over, though, which means that the statute of limitations is no longer relevant and the collector can legally sue for the balance.
As always, talk to an attorney to make sure you’re protected when it comes to time-barred debts.