General Rule: A time-barred debt is one in which the statute of limitations has expired. While a collection agency can still attempt to collect on it, the debt is not legally enforceable.
Most consumers do not want to spend their time dealing with a collection agency. However, it is even more unsettling to get a call about a debt you forgot about. This happens, for example, when a company buys a debt that no one has collected in years.
If this happens to you, do not panic. It may be that you do not have a legal obligation to pay the debt. However, even if a collection agency can collect on the debt, they still have certain requirements they must follow. Namely, they must abide by the Fair Debt Collection Practices Act (FDCPA).
After reading this article, you will know how to identify a time-barred debt. In addition, you will learn about your options when a collection agency tries to collect on a time-barred debt.
How Does a Debt Become Time-Barred?
A debt becomes time-barred when the account has been inactive for a period beyond the statute of limitations. The statute of limitations depends on state law. However, some common elements impact when a debt becomes time-barred.
A primary factor in many states for determining if a debt is time-barred is the type of personal account. Open-end accounts allow a person to continue to take out debt up to a certain limit. A closed-end account is a one-time loan for a fixed amount. For some states, there is a shorter statute of limitations for open-end accounts.
Another factor is whether the agreement is oral or written. Usually, it takes longer for a debt to become time-barred for written contracts as opposed to those done orally.
However, check the laws on time-barred debts in your state. Each state may have its own nuances in determining when a debt becomes time-barred.
Can a Collection Agency Attempt to Collect on a Time-Barred Debt?
Yes, at least under the FDCPA. While a collection agency can continue to collect on a time-barred debt, they must do so professionally and honestly. That means, all of the requirements of the FDCPA still apply. They cannot harass you or try to trick you into making a payment on a time-barred debt.
In addition, a collection agency may not sue you over a time-barred debt. In fact, they cannot even make a threat to file a lawsuit for a time-barred debt.
It is important to understand your state’s statute of limitations. In some states, there is action you can take that will restart the statute of limitations. The primary way you can restart the statute of limitations is by making a payment. However, in some states, even a promise to make a payment can restart the statute of limitations.
Note: The FDCPA and the statute of limitations impact each other but are separate. The statute of limitations applies to all lenders. However, the FDCPA only applies to third-party debt collectors.
What Should I Do if Contacted About a Time-Barred Debt?
If a collection agency contacts you about a time-barred debt, you have some options. While you certainly can pay the debt, you are under no obligation to do so. One tactic is to just ignore them. However, a collection agency can be relentless.
If a collection agency continues to contact you, simply ask them to stop contacting you. If they continue their efforts, send them a cease-and-desist letter. This should end all communication. If not, consider either of the below options:
- Report the Harassment to a Federal Agency. You can submit a complaint about the collection agency to the Consumer Financial Protection Bureau (CFPB). You can also report any FDCPA violations to the Federal Trade Commission (FTC).
- File a Lawsuit. A more involved way to stop the harassment is to file a lawsuit for a violation of the FDCPA. Not only will this stop illegal behavior, you may receive compensation as well.
Conclusion
While a collection agency may still attempt to collect on a time-barred debt, you now understand your rights. However, you must be careful as your action may change the status of a debt.
If a collection agency is contacting you about a time-barred debt, do not respond right away. You might want to consider discussing your options with a consumer rights attorney. They can explain your options and the best way to address the situation.
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