Debt has an expiration date after which collection activities must cease. In other words, creditors have to stop asking you to repay a debt after a certain amount of time has elapsed. This, in part, explains the brazen tactics most collection agencies employ. They know they only have a finite amount of time in which to get you to pay, so they push you as hard as they legally can before the clock runs out. However, you should know, once the period passes you can inadvertently start it over again.
Here’s how to avoid resetting the clock on old debt.
There Are Actually Two Clocks
While it varies from state to state, the statute of limitations on old debt typically runs from three to six years in most cases, although it can run as much as 15 years. The second clock is the period during which a bad debt lives on your credit report. That one goes for seven years, regardless of the state in which you reside and begins running six months after you stop paying the creditor.
Once that clock runs out, nothing anyone can do can restart it—with one exception. If a creditor gets a court judgment against you, that clock can run until the judgment expires, which is typically seven years from the date of the filing of the judgment, as opposed to six months from the date you stopped paying.
Mind Your Words
Collectors sometimes still call you, even after the clock has elapsed. If they can get you to admit the debt is yours, the time period begins again. To learn more about the nature of the debt, without opening yourself to renewed collection activity, you must speak with the collector in hypotheticals:
- “I am sure this isn’t my debt, but I am curious to know what this is all about, tell me more.”
- “While I am absolutely not agreeing this is my debt, if it were, what would it take to settle it?”
Simply put, it’s OK to ask about the nature of the debt, as long as you preface questions with a declaration of non-responsibility.
Order Them to Cease and Desist
You can tell creditors to stop harassing you after the debt has expired, without admitting ownership of it. Under the Fair Debt Collection Practices Act, you have the right to insist collectors leave you alone—without admitting the debt is yours. Once you know the particulars of the debt, you can issue a cease and desist letter based upon the information they provide. Just be very careful to include language stating the debt is not yours.
Avoid the “Partial Payment” Trap
Any amount of money you remit to a creditor or a collection agent can be construed as an admission of ownership and reset the clock. That “innocent little payment” can put you back on the line for the entire balance, plus interest and penalties.
If you decide to agree to settle a debt for a partial payment, be careful to get a written agreement that the payment you’d theoretically send would constitute payment in full— before you admit to owning the debt or paying anything on it. Similarly, if you engage a debt relief firm to work on your behalf, make sure the debt is listed as “paid in full” once you’ve satisfied the terms of the agreement negotiated on your behalf.
However, before you decide to work with a debt settlement company, be careful to choose one that is reputable. Freedom Debt Relief reviews typically contain kudos lauding the company’s credibility. Be sure to investigate similar reviews for any service you consider.
Know Your Legal Rights
If you believe a creditor is coming after you because of an old debt, you can take them to court and win a judgment against them. However, you must be capable of proving the statute of limitations has expired. The court will not seek to determine this on your behalf. You have to prove it.
Knowing how to avoid resetting the clock on old debt could save you from being responsible for paying a debt that has expired.