Debt Consolidation

Buried in Debt? You May Not Have to Pay It

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Time-barred debt is old debt that a creditor cannot sue you to collect, as it has reached the statute of limitations. However, you do still owe the debt, and debt collectors may still contact you to try to get you to pay.

In this guide, learn how to determine if a debt is time-barred and what happens after the statute of limitations on debt is reached.

What is time-barred debt?

Debt becomes time-barred when it reaches the statute of limitations, the number of years a creditor has to sue a debtor over unpaid debts. This interactive map below shows the statute of limits on debt collection by state and type of debt:


Some types of debt, such as federal student loans, don’t have a statute of limitations. Federal tax debt reaches the statute of limitations after 10 years.

When a debt becomes time-barred, it doesn’t go away. You still owe the debt, although you can’t be sued for it. Because you can’t be taken to court over time-barred debt, you don’t risk having your wages garnished or any property being used as collateral seized.

Does time-barred debt affect your credit score? Yes. Accounts that are in collections will generally remain on your credit report as delinquent for seven years after you first miss a payment.

What is the time limit for debt collection?

There’s no real limit for when a debt collector can stop pursuing a debt. In most states, debt collectors may still try to collect after the statute of limitations has been reached. As long as they’re following the Fair Debt Collection Practices Act, this is completely legal.

If you’ve been contacted by a debt collector over a debt that you believe may be time-barred, ask these questions:

“Is this debt time-barred?” Debt collectors must answer truthfully, but they can also decline to answer.

“What do your records show as the date of my last payment?” This can help you determine when your debt will reach the statute of limitations.

“Can you send me a letter of verification?” If the debt collector doesn’t answer your questions, request a letter of verification for the debt.

What happens if you make a payment on time-barred debt

Making a payment on time-barred debt can “revive” it, depending on the state in which you live. This would essentially reset the statute of limitations on your debt, and you can be sued over the debt if you don’t continue to pay. The debt collector may even include additional interest and fees that the debt accrued while you weren’t paying it.

How do I know if my debt is time-barred?

When your debt becomes time-barred, you won’t get a letter in the mail or a push notification on your phone. You have to determine if your debt has reached the statute of limitations with a little math and research.

Here’s how to find out if your debt is time-barred:

  • Get a copy of your credit report. Get a free copy of your credit report from the three major credit bureaus at www.AnnualCreditReport.com.
  • Determine your last debt payment. Looking back at your records, find the last time you paid toward your specific debt. This is the date you will use to calculate whether your debt has reached the statute of limitations.
  • Find the statute of limitations in your state. Each state has its own laws to determine when a debt becomes time-barred.
Still not sure if your debt is time-barred? Get in touch with a nonprofit credit counseling agency. Credit counselors can advise you about the best way to handle debt, and even set you up on a debt management plan if necessary. You can also contact a lawyer or your state’s attorney general.

What to do with time-barred debt

When your debt has reached the statute of limitations, you might be wondering if you should pay it. Here are your options:

Pay nothing. You can’t be sued over the debt, but debt collectors can continue to try to collect the debt. The debt will generally remain on your credit report for seven years, which damages your credit score and makes it more difficult to open a line of credit, get a loan or even rent an apartment.

Settle the debt. You may be able to settle the debt for less than what you owe by negotiating with the debt collector. Get a signed agreement from the collector that confirms you’re settling the debt before you make a payment. If you don’t have a signed agreement, it might look like a partial payment on the debt, which could revive your debt.

Keep in mind that if you settle your debt for less than what you owe, it could still negatively affect your credit for up to seven years. However, you may be able to request that any negative information be removed from your credit profile during the negotiation process.

Tip: Do not make a partial payment on your time-barred debt without talking to a lawyer. Paying even a small amount may revive your debt in some states, which means you could be sued over it, including any interest and fees that have accrued. Find out the laws in your state before making any payments on a time-barred debt.

 

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