Handling Old Debts: Strategies and Legal Rights

In a previous infographic, we illustrated that when it comes to old debts, there is a statute of limitations which establishes a period during which creditors or collecting agency may sue borrowers to collect a debt.

In most states, the statute of limitations comprises between four and six years after the last payment. A debt outside this period is called a “time-barred” debt. It prevents a collector from trying to collect at all once a debt is past the statute of limitations. Nonetheless, some debt buyers still go after borrowers and even take them to court.

If your client is contacted by a collection agency about a very old debt, Credit.com advices the following:

• Ask the debt collector to send your client a written notice of the debt. The federal Fair Debt Collection Practices Act requires it, even if you don’t ask.
• Once your client receives written notice of the debt, they have 30 days to request validation of the debt. Mail your request to the collector with a certified letter and simply ask them to validate the debt.
• While awaiting a response from the bill collector, have your client contact a consumer law attorney or their state attorney general’s office to confirm the statute of limitations for the debt.

If the client confirms the debt is too old, he has three choices:

• Pay: If he knows he owes the debt and has the ability to pay it, he can do so. Advice him to keep written records of the amount due and the payment.
• Settle: If your client acknowledges the debt but cannot pay the full amount (or if fees have inflated the debt), they might consider negotiating a settlement for less than the total due. This approach is complex as it could reset the statute of limitations, potentially leading to a lawsuit for the entire debt. Your client should contact an attorney first.
• Send the collecting agency a letter telling to the leave him alone: Your client has the right to ask a debt collector to stop contacting him. The collector is only allowed to contact if they take legal action against your client.

Conclusion:

Navigating the complexities of old debts requires informed decisions and a clear understanding of one’s rights. Whether it’s verifying the debt, considering payment or settlement options, or legally requesting cessation of contact, being proactive and knowledgeable is crucial. Consulting legal experts and understanding the statute of limitations are key steps in effectively managing and resolving old debts.