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What happens to old debt?

On Behalf of | Jan 19, 2023 | Fair Debt Collections Practices Act (FDCPA)

When in a tough financial situation, outstanding debt can be an issue for months or even years. When you owe money to a creditor, the amount you owe will not disappear over time. However, creditors cannot take certain actions when it comes to old debt.

Understanding the rules and regulations surrounding long-term debt is crucial to ensuring your rights remain respected. Here are a few things to consider about old debt and creditors.

Debt has statutes of limitation

Creditors can pursue legal action against people who have not paid off their debt. However, they must file a suit within the statute of limitations to remain compliant with pertinent laws. Time-barred debt is any debt that has exceeded the statute of limitations, a period of time that typically begins after the first missed payment.

When debt becomes time-barred, creditors can no longer file lawsuits against you. Keep in mind that time periods vary quite a bit from state to state. Also, some states have laws on record that stipulate acknowledging debt means that the clock re-starts as it pertains to statute of limitations. Accordingly, you must understand the laws in your state to determine whether debt is time-barred.

Creditors can still contact you regarding time-barred debt

While they cannot pursue legal action, some states allow creditors to continue contacting you even with time-barred debt. If the practice is legal, creditors can contact you via mail, phone, and email to recoup the money owed to them. If the practice is not legal where you live, you can file a complaint regarding unwanted contact.

Even though you have protection when it comes to legal action, any outstanding debt will remain on your credit report for seven years. As a result, you must consider whether you have the means to pay down the debt, or even make an arrangement with the creditor to make installment payments.