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Time Barred Debts

When is an old debt too old for a collector to sue?

Typically, state law determines how long the statute of limitations lasts. Usually, the clock starts ticking when you fail to make a payment; when it stops depends on two things: the type of debt and the law that applies either in the state where you live or the state specified in your credit contract. For example, the statute of limitations for credit card debt in a few states may be as long as 10 years, but most states impose a period of three to six years. To determine the statute of limitations on different kinds of debts under each state's law, check with a legal aid lawyer, another attorney, or your State Attorney General's Office.

The statute of limitations for a debt is usually different from the reporting period for a debt on your credit report.  In general, negative information stays on your credit report for seven years.

Must I pay a debt that's considered time-barred?

The decision to pay a time-barred debt is up to you. You have options, but each one has consequences. Consider talking to a lawyer before you choose an option.

Pay nothing on the debt. Although the collector may not sue you to collect the debt, you still owe it. The collector can continue to contact you to try to collect, unless you send a letter to the collector demanding that communication stop. Not paying a debt may make it harder, or more expensive, to get credit, insurance, or other services because not paying may lower your credit rating.

Make a partial payment on the debt. In some states, if you pay any amount on a time-barred debt or even promise to pay, the debt is 'revived.' This means the clock resets and a new statute of limitations period begins. It also often means the collector can sue you to collect the full amount of the debt, which may include additional interest and fees.

Pay off the debt. Even though the collector may not be able to sue you, you may decide to pay off the debt. Some collectors may be willing to accept less than the amount you owe to settle the debt, either in one large payment or a series of small ones. Make sure you get a signed form or letter from the collector before you make any payment. This document should state that the entire debt is being settled and that the amount to be paid will release you from any further obligation. Without this document, the amount paid may be treated as a partial payment on the debt, instead of a complete payment. Keep a record of the payments you make to pay off the debt.

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